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Emerging Challenges in Democratic Developmental State:
The Case of Ethiopian Growth and Transformation

By Desta, Asayehgn, Ph.D.
Sarlo Distinguished Professor of Sustainable Economic Development
Dominican University of California
July 09 2011

Pursuing the Neo-liberal economic model, initiated by international financial institutions, and imitating the command economic system adopted by the socialist countries in which central governments play a pivotal role in planning and programming, Africa illustrates how irrelevant policies and the misuse of abundant resources have led to its deep economic crisis of the last three decades. Therefore, to lift the African continent from deep poverty and rampant unemployment, the Economic Commission for Africa (2011) has challenged the African states to follow the Malaysian approach and structurally transform their economies from an agriculture- intensive economy to a more industrialized and knowledge-based economy. The Economic Commission for Africa was advised to pursue a model that is positioned between the Neo-liberal open economy and a centrally-planned system, known as the developmental state. That is, instead of undergoing marginal adjustments under the state-led economic model and the open Neo-liberal economic system, the African nations were heavily persuaded to make dramatic structural changes under a democratically-nested developmental state model. As stated by the Economic Commission for Africa( 2011, p. 75), while adhering to the tenets of democratic values, the industrialization policies of the developmental state promote capital accumulation, utilize reserves of surplus labor, relax the utilization of foreign exchange constraints through import substitution, and coordinate and allocate resources through well-designed and strategically focused plans.

If followed, the structural transformation which the Africa Commission has in mind is expected to bring about diversified changes in the composition of the output of each country. To become developmental states, African countries will have to build transformative institutions, primarily run by competent, professional bureaucrats. The state being a developmental agent is further expected to have a well-disciplined planning process and is expected to operate in well- designed institutions (Economic Commission for Africa, 2011). In order to put an end to Africa’s deep economic misery, the Commission further strongly recommends that the political leaders of the developmental state in Africa need to be committed to national development goals that are supported by a strong vision. All developmental projects have to be managed by competent and professional bureaucrats, recruited solely on meritocracy, and autonomous from the influences of rent-seeking groups. Furthermore, the Commission recommends that as autonomous professionals, the state bureaucrats should have the power to design, pursue, and implement policies to enable their respective countries to move away from their subsistence economies to industrial or even post-industrial societies that stand for green economic structural transformation and that will result in steady, sustained economic growth rates, relatively low growth volatility, and a greater capacity to create jobs (2011).

More specifically, rather than abiding by the free market forces that drive economic transformation through supply and demand, the plan envisioned by the Economic commission for Africa is for Africa to follow the Malaysian developmental state model to accomplish structural economic transformation. Like Malaysia, African states were encouraged to rely on active state-led developmental and industrial policies based on planning, formulation of appropriate strategies, and the implementation of plans and policies (2011). To attract foreign investors with capital, management, and marketing expertise which could be used in an effective structural transformation, the African developmental states were further advised to have investor-friendly environments complete with the necessary infrastructures, trained human capital, and a politically stable environment with well established rules of law, an independent judiciary system, and effective regulatory bodies ( 2011).

In Asia, the implementation of the developmental state plans was almost entirely dependent on discipline and the interventionist power of the state to guide the industrialization process. The Asian developmental paths were predominantly designed on the premise that Western democratic values were foreign and a luxury unsuited for the promotion of development in Asia (See Mohamed, 1994). However, though the African states were required to follow the Malaysian type of development, at the same time the Commission for Africa set standards based on Western democratic values. To design and implement the national development strategies, the Commission therefore suggested that political leadership, private sectors and the civil societies in each African state need to collaborate with the committed professional bureaucracy to legally influence the direction of development (Economic Commission for Africa, 2011).

Given the conceptual framework of the developmental state that is framed by the Commission for Africa (2011) and bearing on the specific operational definitions of a developmental state forwarded by Bolesta (2007), it is time to briefly assess Ethiopia’s progress to see if Ethiopia has planned the groundwork for the establishment of a developmental state necessary for achieving the five-year (2011-2015) Growth and Transformation Plan (GTP). As stated by State Minister, Makonnen Manyazewal, the five-year GTP is based on the performance of the economy and focuses on the following seven variables: 1) rapid growth of the agricultural and 2) industry sector, 3) improvement of social services, 4) increased investment in infrastructure, 5) building the capacity of government institutions to ensure transparency, 6) combat rent-seeking tendencies, and 7) investment in institutions of democracy in the country (Yacob. T., October 1, 2010).

For Ethiopia, the vital query at this juncture is whether or not Ethiopia is engaged in the process of applying a developmental state that will attain: 1) socioeconomic development transformed via an industry-led growth strategy, 2) a stable democratic framework and developmental government, 3) the transformation of the state managed by competent bureaucracy that is assigned based on meritocracy, 4) an autonomous institutional environment that is less likely to be influenced by the ruling political elite and political cadres, 5) a capitalist economic environment where private sectors play a crucial role in the development process, and 6) a sustained economic system largely based on export-led growth to combat poverty and generate full employment at a stable price.

Is Ethiopia prepared to become a developmental state? Over the last seven-years, Ethiopia has recorded steady economic growth and has achieved a remarkable up trend in establishing health services and social development programs. (See for example, Tolina, 2007; Hassen, 2010) Some of the infrastructure services, such as roads, railways, air transport, and telecommunication services are in the process of being reengineered and a few are now in use. Though worthwhile attempts have been made to electrify the rural areas, still a large segment of the rural population and especially women become covered by toxic smokes that result from the burning of wood or cow dung while cooking, and the use of kerosene lamps for lighting their shattered houses. The health facilities available in the country seem to be better than under previous regimes, but it is sad that the health care service centers operating in Ethiopia are still ill-equipped. Actually, a number of households in rural Ethiopia fetch their water for home use from contaminated streams and rivers. Because of this, priority has been given in the five-year GTP to provide universal potable water services to a large section of the country (Yacob, T. September 30, 2010).

In quantitative terms, it is remarkable to notice that Ethiopia has achieved almost universal primary education. However, when we examine the quality of the rest of the public school system, the second-class public schools seem to be less conducive to learning. The teaching materials and the teachers are inadequate. In fact, since the currently enrolled students see those who graduated before them are still looking for jobs, they perceive their school environment as hostile. In fact, at times, it is no wonder to see that the some public schools are fertile grounds for the agitation of student unrest against some of the policies initiated by the exiting political order. Given the dual system of education in the country, consisting of well furnished private schools teaching children of the emerging upper class alongside the ill-equipped public schools that are supposed to educate the children of the poor, it is likely that this situation may not only perpetuate class differentiation and but will also likely deter the government’s plans for growth and transformation.

In order to achieve Ethiopia’s socioeconomic development via the industrialization process, it needs to be known at the outset that the transition from an agricultural to an industrial economy is an arduous and time consuming enterprise. For example, it took nearly a century for Britain and one-half a century for the United States to become the world’s industrial leaders. Using Foreign Direct Investment–led strategy as a quicker and more effective means of acquiring modern technology to generate export competitiveness, it has taken only about three decades for China to become the world’s second-largest economy. Moreover, it could be said that it has taken about ten years for a number of Asian countries to industrialize and even move beyond into knowledge-based economic development. (See for example Ozawa, June 6, 2011).

In theory, the Neo-liberal economists’ school of thought, the globalization optimists’ perspective, and the developmental state paradigms assume that the diffusion of technology from more advanced countries toward the developing countries will speed up the industrialization process and eventually allow developing countries to catch-up with advanced countries. In line with this assumption, to pull the country out of poverty and deprivation and ultimately to achieve the five-year Growth and Transformation Plan via industrialization, Ethiopia, like the “Asian Tigers” has designated the state to act as a promoter of development. To climb higher on the development ladder, at least on paper, the Ethiopian state has systematically planned for the necessary human capital, the amount of foreign debt and assistance, domestic savings and technology, foreign technical information and technical knowledge available from foreign investors ( i.e., via licensing, joint venture or turn-keys) and the amount of capital investment it could obtain from the Ethiopian Diaspora in order to accelerate its domestic production, diversify and stimulate its exports. (See Tegenu, 2011;Ozawa, June 6, 2011)

In addition, based on the lessons learned from the 1995 Agricultural Development-Led strategy, the 2002/03 to 2004/05 Sustainable Development and Poverty Reduction Program (SDPRP) and the 2005/06 to 2009/10 Plan for Accelerated and Sustained Development to end Poverty (PASDEP), the Ethiopian government strongly felt that it has a mandate to launch the Growth and Transformation Plan (GTP) for the period 2010/11 to 2014/15 in order to achieve not only the Millennium Development Goals but also to make Ethiopia one of the middle income countries by 2020-2023 ( Kunama, G. May 12, 2011). Although it is a paradox for democracy and developmental states to coexist, by promising good governance and at the same time pursuing the democratization process, the Ethiopian developmental state is planning to reconcile the contradiction by undergoing the industrialization process in order to achieve the goals of the five-year Growth and Transformation Plan

It is too early to assess the implementation of the Ethiopian Growth and Transformation Plan. Given that the global economy has changed, the projections that the Ethiopian economy would very likely attain a growth rate ranging from 11.4 to 14.9% in 2012 need to be revised to reflect the reality of global change. As a result of the recent deep, world-wide recession and the ensuing energy crisis, it worth noting that the economic output of Ethiopia has also declined markedly. Actually, in 2011, Ethiopia’s output has slowed dramatically from the government’s projection of 11.4 to 7.5%. It is further projected by the International Monetary Fund and the World Bank that Ethiopia’s GDP is likely to decline to six percent in 2012 (Davison May 31, 2011). Nevertheless, at least in the energy sub-sector, the goal of GPT is the construction of new Great Ethiopian Renaissance (millennium) hydropower generation projects, which would generate foreign exchange by exporting hydro-power energy to neighboring countries (Kunama, G. May 12, 2011).

To speed up Ethiopia’s industrialization process and to generate foreign exchange, the Ethiopian government has been leasing virgin farmlands to foreign investors (i.e., to Saudi Arabia, India, China, some of the European Union countries, Israel, United States, etc.) by bestowing incentives such as tax holidays, exemption from the payment of custom duties, relief taxes on imported capital, and exemption from payment of sales and excise taxes for export commodities. Nonetheless, it is worth stating again that like other host countries in Africa, Ethiopia is not likely to see capital, know-how, or technology from the foreign investors. (See Desta, January 10, 2010) Also, those who were evicted from their land will not get productive employment. The evicted local people will face food scarcities and starvation. In short, from capital intensive use by the foreign investors, the country will face devastated soil, dry aquifers, and a destroyed ecology from chemical excesses (Mersha, 2009).

The overall developmental goal of the developmental state could achieve the intended results if the means are systematically strategized (Castellis, 2000, p.284). Since 2004, the EPRDF government has identified industrial development as a priority, but it has been allocating less budget to the industrial sector when compared with other sectors (Tegenu, T. (June 6, 2011). Even now, to accomplish the five-year (2011 -2015) Growth and Transformation Plan, the Ethiopian government is heavily relying on some of its international development partners to allocate aid for funding the five year GTP (Yacob, T. (October 1, 2010). But, Ken Ohashi, the World Bank country Director argues that Ethiopia has consistently depended on foreign capital to finance its yearly budget deficits. Now, without adequate domestic saving, it is planning to finance the hyped five-year Growth and Transformation Plan from external sources. If taken seriously, Ohashi thinks that the implementation of Ethiopia’s GTP seems unrealistic and unattainable (Nazret.com, 6/9/2011). In addition, though the UN country team in Ethiopia has agreed to support the implementation of the plan and the Irish Ambassador to Ethiopia appreciated the plan’s priority on industry, the Head of the European Commission Delegation to Ethiopia was very critical of the plan’s focus on environment, population and external financing (Yacob, T. September 30, 2010).

With the exception of democratic Japan, the developmental states in Asia, regard democratic values as Western constructs, purposely designed to impose Western cultural values on non-Western countries (See Mohamed, 1994). However, contrary to the functions of Asian developmental states, the Commission for Africa (2010) strongly challenged the African states to be managed by competent bureaucracy and operate in a relatively stable democratic environment where: a) power and civic responsibility are exercised by all adult citizens directly or indirectly through their elected representatives, b) decisions are based upon the principles of majority rule, c) there is an understanding that its function is to protect human rights (such as freedom of speech and religion, the rights to equal protection under law and the opportunity to organize, etc.), d) there is broad suffrage and regular free and fair elections open to citizens of voting age, and e) it conforms to the rule of law, which means that the law is supreme and binding on everyone (See for example, Lipset, 1963, Huntington, S, 1991). On the other hand, from the African perspective, Habisso (2010) argues that imposing democracy on the poor and ethnically divided, which characterizes the African environment, can trigger bloody national struggles. Therefore, can the African states simultaneously embark on establishing democracy while pursuing a developmental state to achieve socio-economic growth in the long run? Specifically, the fundamental questions that need to be raised at this juncture are: 1) has the Ethiopian state embarked on democratic values to achieve its Growth and Transformation Plan, and 2) to be regarded as developmental-oriented state, does Ethiopia posses a competent bureaucracy that is able to assign work and hire personnel based on meritocracy, competence, and experience?

When compared with its previous political environments, it is possible to regard Ethiopia as an emerging democratic state. Viewing it from the surface, the country at times seems to abide by the rules of law. Elections are regularly conducted every five years. Since the government has established various developmental plans as a means of achieving legitimacy, it assumes that it has the support of its own people. Opposition groups on the other hand feel that the outcomes of all elections held thus far in the name of democracy have been used for window dressing. In addition, competing political groups claim that since the elections held in Ethiopia are not based on broad suffrage, those elected are mainly political cadres and the outcomes of the elections have been predetermined. Also, the opposition groups assert the country lacks parliamentary democracy and decisions are not based on the principles of majority rule. During the 2010 election, for example, the incumbent party, the Ethiopian People’s Revolutionary Democratic Front (EPRDF) won 499 of the 536 seats in parliament. In view of this, the US Assistant Secretary of State for African Affairs, Johnnie Carson, and the Chief European Union (EU) observer, Thijs Berman, reported that while the elections were “peaceful and well organized,” they noted that the elections were an "uneven playing field" and criticized the use of state resources in the EPRDF campaign in order to prevent other competing political parties from participating on equal footings (BBC News, May 25, 2010). Though the competing parties that participated in the 2010 election had equal access to the state-owned media to articulate their views, it was widely felt that more time was given to the ruling political party at the expense of other competing parties. Given these discrepancies, a number of other Ethiopian opposition groups have attempted to discredit the results and claim the results of the 2010 election were rigged, and alleged that the election process was fraudulent and undemocratic. In addition, it is worth noting that various opposition groups strongly feel that the judicial system in Ethiopia does not act independently to protect the rights of Ethiopian citizens but is an appendage of the ruling party.

The Ethiopian bureaucracy is managed by civil servants that have clearly spelled-out functions. The government functionaries and technocrats are by and large recruited on meritocracy and are expected to serve competently. While they are on the job their skills are improved via various experiential learning seminars. However, the institutions in which the functionaries operate are not autonomous. They are strongly influenced by the ruling elite. From the point of view of equal representation, the higher positions in many governmental departments are assigned according to an ethnic-based quota system. Thus, though the functionaries might be recruited on meritocracy, due to the perception held by the public, willingly or unwillingly the bureaucrats are expected to operate in conformance with their ethnic affiliation rather than in pursuit of the goals of their organization. Because of this, instead of transparency, the desire to fulfill the wishes of the political agenda introduces the temptation for corruption that has become endemic in the functioning of the Ethiopian bureaucracy. With the benefit of hindsight, it is possible to say that though some of the government-initiated development plans were very rational and if systematically implemented, they could have successfully achieved their intended goals. But, many fruitful projects were unduly delayed because the functionaries lacked the professionalism and commitment needed to mobilize the limited resources of the nation for development. Therefore, if Ethiopia desires to use the state as a very important vehicle to tackle its deep-rooted developmental problems, it needs to improve the competence of its public administration sector and keep public employees politically neutral.

For example, referring to Japan, Johnson (1982) argues that developmental state in Japan is a rational development-oriented strategy developed by the state. The goal of the political establishment is rapid economic development as a means of legitimizing itself. Thus it gives power and authority to the bureaucracy to plan, supervise, regulate, and implement efficient policies. Murakami (1992) also says that developmental state is an ideology in which the political system aims to achieve industrialization with strong government intervention in the market. Industrialization thus is considered to be designed by the state in order to survive and strengthen its economic infrastructure. (See also Abe. M. 2006) Therefore, from a theoretical perspective, the legacy of state as a developmental vehicle assumes that late developer states need to learn through diffusion of technology in order to be as effective as Western early developers. In the East Asian developmental state, the states had to direct development themselves because local capital was not mature enough to promote economic development (Abe, 2006).

The foregoing analysis suggests that the state has to design the developmental plans, intervene in the implementation of its strategies, evaluate the outcome of the results but leave the market to free from market interventions. Following the pattern of logic under which the Ethiopian government is functioning, it is very difficult to assume that current Ethiopia is an example of a market-friendly developmental state. Though not explicit, the regime appears to be pursuing a centrally-planned economic system. Among other things, more recently the government has instituted hard price controls measures on various edible products to deter inflation. As ironically stated by Habisso, contemporary Ethiopia can be “…equated with the mere imposition of ‘hard power’ and authoritarian rule on the society with the sinister aim of perpetuating one-party rule under the guise of implementing socioeconomic and political policies and programs in order to achieve fast and accelerated economic development and to extricate the poor masses from the scourges of poverty and deprivation in a short period of time.” (August 23, 2010).

The Ethiopian regime has openly declared it is in the process of transforming its political system toward democracy in order to bring about a “renaissance for Ethiopia.” Given this pronouncement, it could be said that the Ethiopian government is struggling to operate in a democratic way. Maybe because of the economic hardships the country is facing, the Ethiopian government seems to be stumbling in its pursuit of democracy and is not effectively operating to fulfill the requirements for an open market-oriented developmental state. The Ethiopian political and economic environment seems to be confounded and appears to be operating like a centrally-planned economic system. In line with developmental state pursued by the Asian tigers, the Ethiopian state and bureaucracy needs discipline. Also, like the market–oriented capitalist systems, it needs to allow the market to operate freely but also to regulate it to fulfill the country’s Growth and Transformation Plan (GTP). In short, in view of the Commission for Africa (2010), it needs to be underlined that if Ethiopia’s state wants to be to developmentally-oriented, it has to create an adequate basis for developmental policy, managed by a professional administration that creates an Ethiopian environment conducive to industrialization that subscribes to democratic values, and operates under a relatively free market system.

In short, instead of navigating with an ambiguous plan that may lead nowhere, the Ethiopian government needs to coordinate the objectives of its five-year Growth and Transformation Plan with its institutional characteristics. To bring about environmentally sustainable development projects that could generate structural transformation and growth with full employment, Ethiopia needs to create a favorable business climate so that public and private investments in the country could function successfully. An important lesson to draw from the East Asian developmental experience and more particularly from the Malaysian experience that could subsequently be applied to African countries’ economic systems is that the Asian developmental state model was the product of specific historical circumstances or was developed for different social orders. It can not be replicated or modified to fit African countries socio-political and economic realities. The East Asian development plan needs critical examination before applying it to fit the Ethiopian context. The lessons Ethiopia could have learned from the East Asian development approach is that the chronic poverty and rampant unemployment that it is currently facing can not be tackled in five years time. In an era of global economic crisis and still having more than $5 billion external debt, it is a big challenge for Ethiopia to have designed the five-year growth plan by solely relying on external assistance, grants and foreign direct investments from the Ethiopia diaspora. Given that Ethiopia’s five-year Growth and Transformation Plan seems unattainable, the country ought to examine an alternative paradigm that can be retooled to provide a viable strategically-based and environmentally sustainable development plan.

The African Commission’s call for the construction of a democratic governing system, state capacity-building, planning and intervention without directly owning productive assets, economic liberalization, meritocratic recruitment, competency management, and the autonomous functions of government institutions could bring about smooth and speedy transitions from a poverty-ridden country to achieve environmentally sustainable development in Africa. Though the Growth and Transformation Plan designed by the Ethiopian government seems to be audacious, to be successfully implemented, as articulated by Kofi and Desta (2008), Africa’s development programs need to be built on existing local knowledge and have to have been agreed upon by the people in order for them to be beneficiaries of the development process. Moreover, for Africa to achieve legitimate and sustainable development, local Africans need to be drivers of change and African governments have to relinquish their direct control over many community organizations. Therefore, to chart environmentally sustainable development for Ethiopia at the grassroots level, the next section of the paper will attempt to review how a democratic, development-oriented state could foster full employment at stable prices.