BY ABEBE WOLDEGIORGIS
In the last two decades and a half, Ethiopia’s economic policies had been formulated and misguidedly implemented for the sake of short term advantages. As a result, the country missed opportunities which could enable it to significantly reduce poverty and embark on the right economic growth path.
The current shortage of hard currency which critically hampers investment activities is directly or indirectly the outcome of the past misdeeds. To deal with this issue, the government recently announced that it introduced homegrown economic policy.
Dr. Shimelis Araya is an economist who is in residing in Germany working as a postdoctoral research fellow. He recently told ESAT in the 1990s, Tigrean People’s Liberation Front (TPLF) claimed that it pursued agriculture-led industrial development strategy and as 80 percent of the Ethiopians earn their living from subsistence farming, emphasizing on the sector was taken as a way out.
It also announced that as agricultural products serve as input for industry, linking the two sectors supports the growth of the manufacturing sector, job creation and import substitution.
But after its 2005 election loss, TPLF made a paradigm shift by claiming that it was developmental state in which the government plays a dominant role in the economy, a system that is by far different from the free market system. As to the scholar, this showed how the TPLF’s policies were inconsistence.
The government tried to emulate economic policies that made the Asian Tigers’ economies successful yet were shortfalls witnessed in implementing and contextualizing the policy.
As to him, to raise agricultural production and productivity, inputs such as capital, land and labor are essential. In addition, it requires innovation and technology. These were absent.
The government planned to enable the country to reach a middle-income status by the year 2025. However, the absence of agricultural private investment due to the land policy has significantly hampered the success of the plan. Farmers still remain in subsistence farming and did not achieve food security let alone supplying surplus products as inputs to the manufacturing and other industry sectors such as agro-processing.
The policy aspired to absorb the stranded rural labor via the emerging industry but the prevalence of non-inclusive political space crippled the investor’s zeal to invest their money both on the growth of agricultural and industrial sector’s growth.
In some places, investors engaged in commercial agriculture were expelled because of the arbitrary rule prevailed in regional states.
As to Shimelis, the process of capital formation and accumulation should not have been ethicized. Capital should have been allowed to flow from place to place just like labor and ideas. Access to finance was governed in a discriminatory manner to intentionally favor ethnic or ruling party affiliates. This in turn intern restricted people with the necessary skill set, experience and entrepreneurship capacity form getting access to a loan to start up their businesses.
Allowing people without the knowledge of and capacity for business access a significant amount of finance was just a waste of time and resources, as to the economist.
Such malpractice, instead of supporting the country’s economic growth, opened the room for the scarce resources to be extravagantly utilized for short-term gains by few privilege groups and made the economy to plummet into recession.
As to Shimels, the scarcity of hard currency which is a result of the previous economic mismanagement could be attributed as a push factor for the introduction of homegrown economic policy. Had the economy been managed in a way to meet the country’s long-term economic aspiration, the industry sector would have been able to flourish and take the upper hand to lead the economy.
Currently the rate of poverty in the country, even by developing countries’ standards, is very disappointing. The nation found itself at the bottom level and the previous claim that the nation scored two-digit economic growths in the past decade is question.
TPLF is blamed for the crimes it committed in terms of suppressing human and democratic rights, but equally it has to be blamed for its economic sabotage which pauperized the nation and elevated few to amass wealth illegally and illegally channelled the meagre resources abroad.
The Development Bank of Ethiopia provided loans in billions to party-affiliated companies in but the money had been liquidated and the debt was taken as a non-performing loan to be categorized as government debt.
Everybody knows that he said, the money was drawn from Ethiopian taxpayers. Had the resource been properly allocated, it would have been able to play a crucial role in creating jobs and alleviating poverty.
The long term loan was provided to customers by Development Bank but according to the government report billions of Birr worth of loan was provided to bankrupted public enterprises.
The liquidated money made the Bank itself part of the problem. Instead of providing loan to such reckless companies, it would have been better to provide small farmers with modern agricultural equipment to improve their productivity.
10 years ago, Shimelis served as a loan officer in that Development Bank. As to him, though the bank was established almost a century ago, it has not yet reached the level where it should be due to overexploitation by party officials and their ethnic affiliates.
The bank faced the current crises particularly after the death of the late Prime Minister Meles Zenawi. The bank unlawfully served the TPLF’s interest and recently insiders revealed that years back the now fugitive General Taddesse Worede a member of the Junta, accessed 45 million Birr as a loan without any collateral.
What differentiates Development Bank from other banks is the fact that it provides long and medium-term loan which at least extends for 20 years.
In the time of the emperor, the bank engaged in providing loan to investment companies such as commercial farming, agro-processing, manufacturing, mining, oil exploring and energy companies which play a crucial role in creating job opportunities to citizens.
It is also known by providing loan to companies which support the country’s foreign currency earnings. Contrary to these, it injected billions of birr to Metals and Engineering Corporation (METEC) and sugar projects and large scale farming in Gambella without undertaking a feasibility study and examining the projects’ competitiveness in the market. Sadly, the money was neither invested in the intended projects nor was refunded.
According to the government’s plan, the main objectives of the home grown economic policy, among others, is to correct the ill economic practices and mismanagement of the state-owned financial sector.
By doing this, it is set to create jobs to unemployed citizens in rural areas and urban areas who comprised 30 and 20 percent of the unemployed in the country respectively. On the other hand, boosting export and enhancing the nation hard currency reserves through exploiting natural resources, substituting imports and supporting the growth of the manufacturing sector are also the major goals of the home grown economic policy.
The Ethiopian herald January 3/2021
