BY TEKLEBIRHAN GEBREMICHEAL
The economic news ticker
Ethiopia’s Plan and Development Commission has been accused by Parliament of failing to do the following major tasks:
- Preparing a roadmap for the transition from the Millennium Development Goals agenda to the Sustainable Development Goals Program;
- Making sure that the Sustainable Development Goals are duly incorporated into the country’s national plans; and
- Identifying the respective roles of implementing bodies, stakeholders and development partners.
On its part, the Plan and Development Commission has forwarded as an excuse, among other things, work disruption aused by COVID -19 (“Reporter”, Amharic, Dec.9, 2020).
In another piece of economic news, the Ethiopian Standard Agency has prepared a draft bill aimed at regulating the location, positioning and activity of road–side petty trade with the aim of facilitating human and motor traffic flows and reducing traffic accidents.
Curb markets in Ethiopia particularly in urban areas including Addis Ababa are a major part of the country’s informal economy employing millions of people.
On the other hand, most of the companies under the Ethiopian Public Enterprises Holding and Administration Agency (EPEHAA) are said to have failed to meet their planned revenue targets. The following companies are administered by the EPEHAA:
- Ethiopian Construction Design and Supervision Works Corporation
- Ethiopian Agricultural and Business Corporation
- Ethio -Telecom
- Gumaro Tea Development Enterprise
- Industrial Parks Development Corporation
- Ethiopian Grain Trade Enterprise
- Ethiopian Railway Corporation
- Sugar Corporation
- Metal and Engineering Corporation
- Commercial Bank Ethiopia
- Development Bank of Ethiopia
- Ethiopian Electric Utility
- Ethiopian Electric Power
- Ethiopian Airlines Group
- Water Works
- Design and Supervision Enterprise
- Ethiopian Water Works Construction
- Ethiopian Shipping and Logistic Service
- Ethiopian Insurance Corporation
- Chemical Industries Corporation
- Birhanena Selam Printing Enterprise
- Hotels Development S.C
- Adola Mine Enterprise
- Ethiopian Tourist Trading Enterprise
- Spa Service Enterprise
- Ghion Hotel Enterprises
- National Alcohol and Liquor Factory
- Ethiopian Pulp and Paper S.C
- Ethiopian Postal Service Enterprise Ethiopian Trading Business Enterprise
- Ethiopian Mineral, Petroleum and Bio – fuel Corporation
- Shebele Transport Share Company
- Ethiopian Public Service Employees Transport Service
- Land Bank and Development Corporation
- Ethiopian Toll Roads Enterprise
- Caustic Soda S.C.
- Awash Melkase Aluminum Sulfate and Sulfuric Acid S.C
- Adamitulu Pesticide Processing S.C
- Awasa Agricultural Development Enterprise
• Assala Malt Factory
• Building Materials Supply Enterprise
• Industrial Inputs Development Enterprise
• Defense Construction Materials Manufacturing Enterprise
• Defense Construction Enterprises
• Ethiopian Agricultural Commodities Warehousing
• Service Enterprise
• Ethiopian Construction Works Corporation
• Federal Housing Corporation
• Dry Port Service Enterprise
• Ethio –Djibouti Standard Gauge Railway Transport S.C
• Educational Materials Production and Distribution Enterprise
• Ethiopian Conformity Assessment Enterprise
Hence, these are about 52 enterprises, corporations and groups being administered by the EPEHAA. According to “Reporter” newspaper (Amharic, Dec9, 2020) most of these public enterprises have underperformed vis–a vis planned revenue, income and profit targets.
The paper indicated that of these enterprises, Berhanena Selam, National Alcohol and Liquor, Chemical Industry, Ethio–Engineering and Pulp and Paper Factory had planned an aggregate revenue of 2.5 billion Birr for the first three months of the current year but the actual figure registered was only about 748 million Birr, showing a short fall about 1.7 billion Birr.
The grim economic news continues. The recently levied 30 percent exercise tax on sugar and sugar–related products has had a devastating impact on some 110 factories engaged in the production of sugar and related products, including soft drinks, candies, chocolate bars, etc. An impact study on a sample of fourteen such companies has shown that their revenues have collapsed by 62 percent, with negative consequences on employment (“Reporter”, Amharic, Dec.9 2020).
An even grimier bit of economic news pertains to the Birr/USD exchange rate being quoted on the so–called black market, which has catapulted the USD to over 47 birr per dollar! Similarly, inflation is raging unabated, unemployment is burgeoning as usual, overall economic activity seems to have stalled and investment including FDI appears to have now dived.
The overall current economic picture
The Ethiopian economy has been buffeted by a number of shocks including COVID-19, locust invasions, internal unrest and conflicts. The latter have caused untold damage in terms of loss of human lives and destruction of infrastructure and displacement.
The situation would have been intractable had the international community not come forward with considerable aid in terms of outright grants and soft loans. The recent 512 million USD grant soft loan package extended to the country by the World Bank is a case in point.
The impact of the shocks to the economy on economic variables such as GDP, domestic and foreign investment, employment, saving, fiscal and trade deficits, the rate of exchange, inflation, foreign exchange availability, etc. is still huge and beyond the country’s capacity to cope up with.
Most of the government–owned enterprises listed above are plagued by chronic problems including organizational and management weaknesses, shortage of raw materials, foreign exchange scarcity, voluntary work departures due to poor pay and housing accommodation, financial losses, system collapse as in the Ethiopian Electric, Utility poor output and sales performance etc. Hence, the current overall economic picture at the time of writing is far from favorable.
How to improve the economy on a sustainable basis
The World Bank, the IMF and the international community in general have come up with all sorts of economic policies, strategies and programs to lift poor countries from the quagmire of economic, scientific and technological backwardness in a rather perfunctory manner.
They came up with all sorts of fancy economic programs including structural adjustment, growth and poverty reduction, millennium development goals, sustainable development goals, SAF, ESAF, CCF (Structural Adjustment Facility, Enhanced Structural Adjustment Facility, and Compensatory and Contingency Financing, respectively),and Rehabilitation and Recovery, etc. and have generously provided funding for these programs, but results have at best been a mixed bag. In the case of Ethiopia, slanted official figures and data aside, poverty has not been significantly reduced, structural transformation has not materialized and macroeconomic instability has continued.
In general, multilateral and bilateral foreign aid to Ethiopia has so far failed to achieve its manifest objectives largely because it has been tainted with geopolitical considerations which are usually uppermost in the hierarchy of priorities of the donor governments and institutions.
For instance, Ethiopia has received an estimated 100 bln USD in foreign aid over the last thirty years, but due largely to the witting and unwitting failure of donors to follow up with the purpose and manner of its utilization, the resources have been improperly used to a significant degree including through corruption.
At any rate, no significant improvement in the performance of the country’s economy can be expected unless fundamental reform measures such as the following are taken and implemented:
• The plan and Development Commission should be reorganized, better resourced and staffed to undertake not only macroeconomic planning but also appraisal of development projects;
• Privatize Gumaro Tea development enterprise, Industrial Parks, Sugar Corporation, Metal and Engineering Corporation, Ghion Hotel, National Alcohol and Liquor Factory, Ethiopian Pulp and Paper S.C., Shebel Transport S.C, Caustic Soda S.C., Awash Melkasa Aluminum Sulfate, Adamitulu Pesticide processing S.C., Awassa Agricultural Development Enterprise, Assala Malt Factory, etc.
• Reduce the recently levied excise tax increase from 30 percent to 15 percent;
• Tighten monetary policy further to reduce further depreciation of the Birr after the end of the internal conflict;
• Form a technocratic government which can effect the following radical reforms:
- Land policy changes
- Institutional reorganization
- Drastic reforms in education and training policies and strategies
- Monetary and fiscal policy changes
- Credit policy reforms
- Enhancement of entrepreneurial talent
Finally, in Ethiopia the people can only be as good as the government, which so far has never been elected by the people. If the government is corrupt, the people are likely to tend towards corruption by necessity because corruption becomes the source of the means of survival.
As gains from corruption are obtained by theft from value created by working citizens, the GDP is simply redistributed and does not grow significantly, making the majority of the people relatively poorer.
In such a scenario, the solution is to make the government accountable through free and fair elections. Hence, after all, the key to improving the economy may well be the institution of free and fair elections.
Editor’s Note: The views entertained in this article do not necessarily reflect the stance of The Ethiopian Herald
The Ethiopian herald January 5/2021
