BY TEKLEBIRHAN GEBREMICHAEL
There can be very little doubt about the credentials of the selected members of the recently established, manifestly independent National Council of Economic Advisors, publicly announced on Dec. 15, 2020. Among the prominent intellectuals and professionals appointed as members of the Council are Prof. Gabissa Ejeta, Prof. Lemma Woldesenbet and Prof. Alemayehu Geda.
These are high-caliber professionals who are believed to be not mainly motivated by pecuniary reward or political power but by the incentive to make a name for themselves by transforming Ethiopia from a basket–case country to one which will demonstrably have achieved a vibrant, middle–income country status in a matter of 15 -20 years’ time.
Of course, they fully realize that they will not be operating in a political and economic policy vacuum. In my opinion, the first thing they are likely to appraise would be whether the existing political system and economic policy are compatible with potential full employment, free competition, high GDP growth, high domestic and foreign investment, low inflation, high export growth and foreign exchange–earning capacity, high domestic saving, rising tax revenue, etc. In fact, they would first like to know whether they should apply the principles of mainstream economics or those of the rather old-fashioned political economy, granted that politics does have a significant influence on the economy even in advanced countries including the USA.
A single economic space
Ethiopia’s internal sovereignty is not as certain as its external sovereignty. The distinguished members of the Council are likely to want to know whether the free movement of labour, capital, goods and services is fully guaranteed within the borders of Ethiopia.
They would also want to make sure that the full advantages of economies of scale accrue in line with the size of the population and area of the country. Where these are not guaranteed due to identity-based political polarization, untoward consequences including market fragmentation and segmentation are likely to impede sustainable economic growth and progress, thereby thwarting the benefits of a single economic space from accruing.
Population stock and its rate of growth
Unfortunately, Ethiopia’s population stock has been increasingly undernourished (giving rise to alarming rates of stunting) and poorly educated and trained, particularly over the last thirty years. Some studies have estimated the incidence of stunting at rates as high as 60 percent and over! However, annual population growth rate is close to three percent. The implication of this for the scarcity of skills and deep knowledge is quite obvious.
Access to factors of production
It is a matter of basic economic knowledge that the process of production is set in motion by combining the four primary factors of production of land, labour, capital and enterprise/entrepreneurship. Skilled labour and entrepreneurial talent are scare because of, as mentioned above, poor education and training.
Land ownership is a de facto government monopoly and access to it is highly partial and politically motivated and not market –and competition –based. Access to capital, which in Ethiopia is largely proxied by bank credit, is also highly preferential and a major source political patronage. The distinguished members of the Council would have to look into the land issue quite thoroughly and seriously.
State versus private Sector
In a developing country like Ethiopia, the role of the state in infrastructure construction and in key transformative industries and technologies should be appreciated. On the other hand, the private sector should be readily accepted as the dynamo and motor of the economy in all other economic and business activities.
Institution–building
Whether we like it or not, the land issue has been a mess and a major cause of economic stagnation. Essentially four types of land tenure systems should be initiated, namely private, communal, government and leasehold. A ministry of land reform and administration with two wings, one for rural and the other for urban land, may be proposed. Of course, constitutional reform would be required to effect this recommendation.
With regard to capital (proxied by bank credit), the Council should be informed that the National Bank of Ethiopia (NBE), Commercial Bank of Ethiopia (CBE), Development Bank of Ethiopia (DBE) and the former Construction and Business Bank (CBB) have been almost completely destroyed by bad management.
The NBE hardly talks about monetary policy, having been reduced to a currency printing press by the Meles regime. The CBE is currently saddled with some 600 billion birr non–repayable loans and credits to so-called government development agencies. The DBE has been badly ransacked by corrupt officials. The CBB went under a long time ago. So, they all require substantial restructuring and reform.
Among other key institutions that should be reformed, re-imagined and refashioned are included the following:
- The education and training system;
- Institutions for developing and enhancing entrepreneurship;
- Project study and analysis institutions for commercial farming, industry, infrastructure and services;
- Stock exchange and bond markets and other capital markets;
- Public utilities including EEPC, Telecom and WSS (water and sewerage services), etc.
- Public enterprises (to be privatized or retained), etc.
In general, extensive reforms in civil service institutions and public enterprises will be required, but priority should be given to land administration, the state banking system, the education and training system, capital markets, project study and analysis, and entrepreneurship.
Restitution of plundered resources
All attempts should be made to regain the 30 billion USD or so plundered by the TPLF regime and its lackeys and hidden abroad. The damage done by this massive loot is almost incalculable. It has actually given rise to an undernourished (and therefore stunted) and a poorly educated and skilled population stock.
The loot is more than a third of Ethiopia’s annual GDP and if it were wisely invested instead of being looted, it would have yielded an aggregate stream of goods and services worth about 150 billion USD over a period of twenty years! So, we Ethiopians have been physically and mentally stunted and have been cruelly deprived of our capacities to sustainably progress by this unconscionable level of corruption and pillage!
Nationalization and privatization
TPLF’s business companies should be nationalized but should be allowed to operate on a commercial basis under competent government–appointed managements. On the other hand, privatization of government owned enterprises should not be hurried. Please let well alone! Don’t mess with Ethiopian Airlines.
It is doing well enough as it is! Improve the management and technological infrastructure of Telecom, but do not hurry to privatize it. Ethiopian Electric Power Corporation and Utility require massive organizational and management reforms, but privatizing them will not do much good. Water utilities should also be massively reorganized. This is a very sensitive area and should be handled with great care and caution.
Covid-19 economic mitigation program
Coronavirus infections and deaths at present are rising at an alarming rate. True, effective vaccines have been developed globally, but it is estimated that at least one year may elapse before they can be available to all Ethiopians.
Hence, side by side with strictly honouring the anti–Covid -19 protection protocols stipulated by the WHO, due consideration should be given to alleviating the economic consequences of the pandemic. Hence, a short–term economic rescue plan should be designed and implemented in at least the following areas: health care (ICU beds, ventilators, PPE, etc) and vaccine rollout, etc); hard- hit economic activities; unemployment benefits, etc.
Concluding remarks
In a civilized and democratic society the objective of assuming political power is to promote economic, scientific and technological development. So, the newly set up independent National Council of Economic Advisors should consider itself to be the main implementer of this vital objective of political power. As such, it would not be improper for it to pretend to be the Council of Ministers of the country.
In that simulated role, the National Council of Economic Advisors. (NCEA) should be able to visualize and concretize an essentially internally propelled economic growth and development model for Ethiopia based on policy, institutional and management reforms. Among the most important policy reforms that need to be made, the following should be accorded priority:
- Land policy
- Education, training, research and development policies
- Credit policy
- Entrepreneurship
- Monetary and fiscal policies
- Institutional reforms
- Merit –based management and administration reforms
- Saving and investment policies
- FDI policy
- Natural resources and raw materials development policies
- Power and energy policies
- etc.
Achievements should be assessed in terms of actual outcomes where there is no statistical manipulation for propaganda purposes. Important deliverables include: business enterprises established; business start –ups; new employment generated; actual GDP growth; sectoral growth rates; foreign exchange grained; FDI inflow; structural transformation attained; IT transformation etc. Then lie back and see if the Council of Ministers can live up to simulation by the National Council of Economic Advisors!
The Ethiopian herald December 30/2020
