Name: Gutu Tesso
Career: Economist
Academic rank: PhD
Administrative Position: President of Oromia Economists Association
Address: Bole Rwanda
The Ethiopian Herald had a time of togetherness with Dr. Gutu Tesso.
The Ethiopian Herald: How do you define Ethiopia’s economy past and present?
Dr. Gutu Tesso: Ethiopia’s economy has come through serious turbulences and ups and downs. If you go back in history and look at the emperor Haile Selassie I, he was surrounded by few elites who controlled all the economic process in the country.
All the productive economic resources, especially lands were in the hands of few elites, while the majority was considered as tenants. In the name of Rist and Gulete whatever is being produced was given to the churches and these few elites. So, the economic activity during that time was really low. It was all about serving those elites and churches.
There was no any strong national economic agenda that could embrace the majority. The economic growth and progress at the time was very low. That is why Ethiopia really lost a chance from the advantage created in the late eighteen and early nineteen century because of the strong control by few elites who were serving their own interest.
Then, after the downfall of emperor regime, the military Junta that came to power really made so many progresses in the country’s economy in terms of land reform and land distribution to tenants. In addition, it is credited for opening of agricultural colleges, facilitating education to the poor and eradicating illiteracy across the country.
However, the very characteristics of Derg regime were that, elites or the highly educated people who could have designed a welfare economic system for the country were eliminated. The period was characterized by grabbing youths by the collar to take them to military training centers rather than taking them to schools. The attention placed on only having a strong military system rather than creating strong economic system in the country.
Also, all the economic activities and enterprises were controlled by the government. Even there was a spirit of centralism in the agricultural of those days. Residential houses, different economic sectors and buildings were taken by government. Due to this, nobody had a motive of investments during those days.
In general, it was a period when the economy hit an ever time low. Many also died due to hunger. Then, after the downfall of the Derg, the groups who came to the power for the last three decades were in confusion what kinds of economic policies to apply or use. The first ten years of EPRDF was a period less economic activities were witnessed. Food insecurity and the vagaries of inclement weather really eroded the country’s economy.
Then, after ten years, the agriculture-led industrialization development program had really brought much progress to the economy, which we can say, is one of the astounding economic progresses amongst African countries.
But the last four years had negatively impacted the economy of the country as people were staging demonstrations and holding rallies in the different parts of the country. Due to this, there were blockages of streets and shutting downs of business sectors in protest against the government. This resulted in the country’s economic downslide.
Generally, the economic processes in the last thirty years are much better than the previous time. Before thirty years, the per capital income of the country was less than one hundred dollar. But now, it has reached eight hundred fifty dollar.
But also in social services and infrastructures like house, education and road, among others, there are significant economic changes. Now, the economy is under high debt which is very difficult to the country. Generally, to define Ethiopia’s economy, it was chalked out based on the interests of the regimes that led the country.
Herald: What are the major problems in Ethiopia’s economy?
Dr. Gutu: Ethiopian economy has several challenges. The disturbance of peace and lack of security can be considered as one of the big challenges to Ethiopia’s economy. Still, there are problems across the country especially in Oromia and Amhara States. People do not feel safe to go and do businesses, cultivate their lands, and tend herds, among others.
In addition, such a setback hurts the Foreign Direct Investments (FDI) of the country. No investor wishes to invest in a place where there is no safety. Second, the Ethiopian economy leans on nature. Though we have embarked on the 21st century, we are still dependent on nature. If the rain is tardy in comings, it will have a negative impact on the economy as 90 percent of Ethiopian population, directly or indirectly, relays on agriculture.
Third, the Ethiopian economy is not private sectored. Over the last ten or fifteen years, the economic growth that was registered in the country was not because of the private sector’s growth. Rather it was attributable to the huge government investment. The lion’s share of all business activities, investments, infrastructures and social services in the country was mainly in the grip of the government.
Another problem is, only few companies are controlling the entire businesses in the country. The importers and exporters are few. Those who became the price maker and the whole consumers turned the price taker. That proved very disastrous to the economy of the country.
The other thing is, unlike other countries, Ethiopia has not been conducive for ease of doing business. When it comes to ease of doing business, Ethiopia’s rank was the worst one. According to the studies conducted in 2017, out of the 190 countries, Ethiopia fell somewhere in the range 165 or 167. That would never really give encouragement to the economic activities.
The other thing is the gap between export and import. The export and import gap in the country remains unbalanced. Looking at the 2017 and 2018 data, regarding 16 billion USD we outlaid for import, the export is only 3 billion USD. There is a serious deficit in terms of foreign currency.
Again, the spirit of entrepreneurship is not well developed in the country. About 95% of Ethiopians solely think about subsistence. Most are not thinking how to create new things. They devote their time on winning daily bread.
The other challenge conspicuous in Ethiopian economy is related with institutions. They are not well developed. The law in their hands was a paper tiger one. The Institutional framework in Ethiopia is very weak. The relationship between producers and consumers is really at its embryonic stage. There should be a strong relation among buyers and sellers.
Another problem resides in the way urban development and expansion took effect in the country. There is an unbalanced urban and rural development across Ethiopia. There are only few cities like Addis Ababa, Mekelle, Bahir Dar, Adama which are growing. But we cannot find another option. Whenever there is unbalanced urban development, there is unbalanced social development.
Even the way these cities got developed was at the expense of others. In addition, these cities are built on the most fecund lands. This is a great loss for a country like Ethiopia beset by food insecurity.
Herald: How could the country tackle unemployment?
Dr. Gutu: The government should be a government that could create new jobs. That was not happening over the last years. The reformed government should sleep over it. Job creation must be seen from a different perspective. One is creating a mechanism via which we are going to use the natural resource to create jobs. There are ample land and natural resources, but we are not using them properly. There should be a system to unlock this wealth of ours.
The other thing has to do with business centers. They are controlled by few found only on few places. The market places in the cities should be available everywhere and there should be inclusiveness.
Industrial parks offer good opportunities to tackle unemployment. But the salary of the employees is very low. It could not cover the necessities of the employees. There should be a kind of revision among our industrial parks.
The other thing that should be changed in Ethiopia is the education system. It doesn’t arm students with skills. It simply offers knowledge. If you simply look at engineers, s/he has no idea on how to create a job. We have to arm our students with required skills, entrepreneurship and among others. Skills need to be a target to create a job in the country.
The business activities in the country are in lethargy. There are only two million registered business sectors in the country including tea shops. Financial sectors in the country do not give money to the majority of Ethiopians. According to the data of 2017 and 2018, the whole commercial banks in the country had given credit to less than 300,000 people. This means the majority of Ethiopians were precluded. So, the financial sector should be redefined.
Moreover, the country is an agrarian one. Agriculture always creates job opportunities. But the job it offers is a temporary one, because our agricultural is a seasonal one and rain feed agriculture. During the remaining seasons many are forced to sit idle at home.
Where the country can create a huge job opportunity on a permanent basis is in the industry sector. The government should give attention to industries. The way these industries are established needs to be redefined. For example, the shoe factories in the country have full materials and inputs at hand. There were no subroutines handled by others. That is not right, there should be a kind of circular way. The inputs must come from different enterprises. Factories should do only the final job. Here, we can create several job opportunities.
Herald: How could the country augment its foreign currency now dwindling?
Dr. Gutu: The sources of foreign currency for Ethiopia for long have been loan and aid. Sources were not from the business sectors. Again, the government was the main actor in bringing foreign currency to Ethiopia. Now, the government seems exhausted to bring foreign currency. The private sector, which has to be the backbone of the foreign currency, was hamstringed.
The small percent of the foreign currency garnered from the export sector is ascribable to the agricultural sector. One of the things the country should do to get foreign currency is the initiative started by the PM in paying the debt. Second, there should be preferential treatment. Do we need outlay dollars to import shoe, shelter, food, car and other luxury items at this critical time? The government must allow such outflows only for medicine and other significant things.
Third is privatization. Government has the lion’s share of all economic sectors in the country. Such a trend has to come to an end and given to private sectors. The other one is remittance. It has been a source of foreign currency for a long time. But the largest number was through illegal way. Now, there must be a tough work to bring them to legal ways. At least the large number must be via financial sectors.
Empowering Diasporas to make their investment in the homeland and encouraging them to participate in the financial sector is a way of solving the problem. In addition, the government should bring to the book those who are participating in circulating foreign currency in illegal ways.
The other main issue is building the image of the country. Currently, all the mainstream Media and social Medias are doing things that tarnish the image of the country. If things continue this way, we cannot attract foreign investor that can invest in the country. Promotion and image building should be made a point of. The task must not be left to the PM alone; all Ethiopians should take their due share of saving the country. There must be a way business promotion is privatized. For example, there are private business promotion companies in India, Korea and Indonesia, among others.
In addition, the investment policies need to be revised. There should be experts who could give service and professional advice to investors.The Industrial selection is the other main thing that has to be strengthened in the country. Almost all the industries operating in the country are import dependent. The funny part of it is the garment factory in the country is importing cotton. We need to build the industries that could substitute imported materials. We need to build the industry that produces all needed chemicals and goods in the country.
In addition, we need to build industries that can export products than industries oriented only to distribute to local consumers.
Value adding is another thing that needs to be promoted on the all products we export. Finally, opening the Ethiopian market and strengthening the trade relation among neighbor countries must be encouraged. The regional trade relationship with neighboring countries is very weak. But the trade relationships with China and Germany are very strong. In these kinds of trade relation, we cannot solve the problems related to foreign currency. Because, what we import from China and what we export are unbalanced. The transaction cannot be comparable. But the transaction within neighboring countries could be equal.
Again, Ethiopia needs to work on labor export. China and India have been working on labor export years back. Ethiopia is the second highly populated country in Africa. We need to target on labor export. We have to work on exporting a literate and productive labor. This way, we can easily get remittance and tomorrow’s investors. These are the main things that should be done to improve the dearth of the foreign currency in the country.
The Ethiopian Herald, Sunday Edition June 2/2019
BY AMBO MEKASA
