analysis
International financial institutions rank Ethiopia as one of the fastest growing economies but debates rage over its political strategy and regional role.
As business and political leaders descend on Addis Ababa for the World Economic Forum on 9-11 May, Premier Meles Zenawi’s government will be trumpeting its economic achievements. Visitors expecting a war-torn land scarred by continuing famine will be shocked. Yet the economic claims of the government, the World Bank and other international agencies (which depend on state cooperation) deserve closer analysis.
On several big issues, Meles has become the voice of Africa and de facto leader of the New Partnership for African Development. He attends Group of 8 and G-20 meetings, says the right things about climate change and gets on well with United States President Barack Obama and Britain’s Prime Minister David Cameron on Somalia.
In cold statistics, Meles’s government – in power for 21 years – has presided over a formidable economic turnaround. A recent World Bank report suggested that Ethiopia navigated the global economic crisis in 2008-9 better than many others. Modest declines in exports, remittances and foreign investment have recovered to more than pre-crisis levels. The International Monetary Fund recently suggested that Ethiopia could join the middle-income countries if its rapid growth continued. All this follows government claims of average 11% annual economic growth for the last eight years. When pressed, IMF and World Bank officials concede the government’s calculations are ‘optimistic’ but ‘not by more than 1 or 2%’.
In November 2010, Ethiopia launched an ambitious five-year Growth and Transformation Plan (GTP), aiming to improve the economy, incomes and social indicators. The government finds Western models largely irrelevant, as was made clear at the opening of the new Chinese-built headquarters of the African Union in January. Meles talks of a ‘Democratic Development State’ on the lines of Taiwan, South Korea and (in the background) China.
Critical outsiders talk of ‘developmental authoritarianism’, lumping Ethiopia with Rwanda as its leading exponents. The idea is that the central government keeps a tight grip on political and social freedom, invests heavily in roads, power plants and communications, and promotes access to markets for small-scale producers. Apart from concern about political freedom, outside critics argue that developing states cannot credibly take on that role, even if backed by lavish Chinese finance.
Another great leap forward
The GTP assumes average growth of 11% at worst and 14.9% at best, doubling the size of the economy by 2015 and matching China’s accelerated growth in the 1990s. It would involve doubling agricultural production, significant increases in industrial production (notably in sugar, with ten new factories), fertiliser, cement, metals, textiles and leather goods. Infrastructure plans include over 2,000 kilometres of railway and 88,000 km of new roads. Hydropower would increase by 8,000 megawatts to 10,000 MW, distributed to 75% of Ethiopia with the possibility of exporting to the rest of Africa and the Middle East. The target is to increase mobile telephone access to reach 45% of the population, a quadrupling of usage but still below South Africa and Nigeria.
Critics say the lack of competition in Ethiopia’s telecommunications sector and lack of internet access are still holding back development. Overall, the aim is to reduce the incidence of poverty from 29% (2010) to 22%. Larger objectives are defined as attaining high growth within a stable macroeconomic framework – in a stable, democratic, ‘developmental state’.
The Horn of Africa suffered its worst drought in decades in 2011. This year’s March to May rains began late and will be below the long-term average; these short belg rains reduce annual food production by up to 30% in northern areas and by 40-50% in the south. A second successive dry year will increase regional food insecurity, especially in the south and east where some 3 million people now get food aid.
Exporting is more difficult because Ethiopia has no port but export earnings for the first eight months of the fiscal year showed a 16% rise on the previous year, with increased earnings from gold and oil seeds (Ethiopia is now the world’s fourth largest exporter of sesame). The main earner, though, is coffee exports, which fell from 122,000 to 75,000 tonnes. The government’s biggest problem is inflation, now at an annual average of 40%. Civil servants and teachers had pay rises last year, but below 40%. Even the director general in a ministry gets only 5,000 birr (US$285) a month. The price of tef, the basic grain, has doubled in the past year, while food prices have more than quadrupled. Blaming this on corrupt profiteering, the government made a brief, unsuccessful attempt to cap prices by order and increased public-sector salaries.
In early February, Meles claimed that inflation had fallen to 32%, saying he hoped it would drop to single figures by July or August. Yet February saw another surge to 36%, then a fall again in March. In early April, he still claimed that control measures were working. He again blamed external factors but tacitly accepted some responsibility by admitting the government had cut public borrowing and was controlling the money supply.
Local oppression
Some authority has been decentralised to district and local administrations which, some say, can be more oppressive than central government. Much control is organised through the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF), whose successes in the 2008 local and the 2010 national elections swept away the opposition parties.
An effort is under way to mobilise domestic savings. The government insists that the 78 bn. birr needed to fund the Grand Ethiopian Renaissance Dam on the Abay/Blue Nile River (see Box, Running water, vaulting ambition) will be met internally though the sale of bonds and other resources. It is also trying to identify cuts to make without harming the whole. The customs authority is being reorganised and attempts made to maximise tax collection. The government is even preparing to take on the Mercato (market) in Addis Ababa, where it is estimated that half Ethiopia’s financial transactions take place in 18,000 legal businesses and 9,000 illegal ones.
In 2011, the tax department took 50.8 bn. birr, 15 bn. up on the previous year; the first seven months of this fiscal year showed a further increase of 12.5 bn. birr. One much-criticised scheme is the drive to develop commercial agriculture by large-scale land leases to foreign companies: some call it land-grabbing. The government has identified 3 mn. hectares available for large-scale production of food or other crops, with nearly 1 mn. hectares of marginal land for bio-fuel crops: jatropha, castor, oil palm and pongamia. Last year’s overall fuel bill was $1.7 bn., up by 25% on 2009-10; it is likely to be higher this year, as tension between Sudan and South Sudan cut off supplies. There are plans to increase ethanol production from the sugar factories now being built.
Another policy international which non-governmental organisations criticise is the resettlement programme which would disrupt the traditional lifestyle of pastoralists – but give them secure livelihoods. In Gambella, Benishangul and Somali regions, 125,000 households have been resettled. On official figures, Ethiopia has reduced rural poverty, improved life expectancy, raised levels of education and other social indicators. The government says it is poised for take off with its large labour force and low wages. Yet the big political questions remain: how much freedom and accountability will the government allow? How fairly will the fruits of faster growth be spread?
Food, housing and water are deemed more important than democracy and trade unions. ‘We’re a fairly tough regime, no one denies that,’ says an official in Addis, privately. He makes Ethiopia’s world view clear: Eritrea is a menace; Somalia is not a cosy neighbour; the Oromo Liberation Front makes threatening noises but is in complete disarray. Foreign NGOs such as Human Rights Watch have difficulty entering the affected areas and horror stories emerge from the refugee camps about periodic political crackdowns.
Human rights training for the police has made little impact; trainees know that toughness is expected and that includes those trained by British specialists, whose contracts have been started, cancelled, then resumed. Meles talks of a democratic development state: it is likely to prove more developmental than democratic.
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