By Hassan Ahmed
Tigrai Onlne - September 3, 2014
The socio-economic stride of Ethiopia is receiving praises and testimonies from several quarters. The latest was Bill Gates, an American business magnate, philanthropist, investor, computer programmer, and inventor who founded of Microsoft company.
In his acceptance speech of an Honorary Degree from Addis Ababa University last month, Bill Gates gave his testimony of the socio-economic stride of Ethiopia. He said: "It is a special honor to receive an honorary degree from Addis Ababa University. This is one of the leading institutions of higher learning in Africa – a continent whose future has been a central interest of my career ever since my wife and I began our foundation nearly 15 years ago."
Mr. Gates noted that:
"Ethiopia has made enormous improvement.....With per-capita income comparable to many other African nations – and considerably smaller than some – Ethiopia is putting itself on a path to the global middle class.
If this proud country – which 30 years ago was seen by many as the world’s most extreme example of poverty and malnutrition – can put itself on this trajectory, there’s no good reason why other African countries can’t do the same.
What has Ethiopia done right? Quite simply, it has made health and agricultural development top priorities."
Explaining the achievements made in the health sector, Mr. Gates said:
"Ethiopia has helped set the standard – most notably with its groundbreaking Health Extension Program. The federal government....identified the geographical gaps in health coverage, and went about filling those gaps, deploying more than 38,000 health-extension workers – nearly all of them women – in over 16,000 health posts nationwide. Since its inception in 2004, the Health Extension Program has provided a range of vital services in maternal and child health; disease prevention; sanitation and hygiene; and basic health education.
Overall, the Health Extension Program has been a great success – and you can see it in the data. The under-five mortality rate fell 67 percent from 1990 to 2012, meaning that Ethiopia met this Millennium Development Goal. The rate of decline has been especially impressive since the middle of the last decade, when the Health Extension Program began its work.
Ethiopia has shown a willingness not only to invest in health, but to do something that is sometimes even more difficult for governments, on any continent: It has been willing to measure results, adapt where needed, and admit the shortcomings that still exist."
Regarding the agricultural transformation strides, Mr. Gates stated:
"I had the privilege of seeing this project myself on my last visit to Ethiopia. I got to see the special soil augurs and sampling techniques that your teams were using. The result of this effort is a soil-mapping system that’s unprecedented not just for Africa, but for virtually anyone in the world."
Bill Gates testimony is not the sole one. The latest African Economic Outlook Report on Ethiopia acclaimed Ethiopia's progress.
The 2014 African Economic Outlook (AEO) Report, an annual publication jointly prepared and published by the African Development Bank (AfDB), the OECD Development Center and the United Nations Development Program (UNDP), titled “Global Value Chains and Africa’s Industrialization” covers 54 African countries.
The report placed Ethiopia among the "leading group of countries" that have improved both their income and non-income components of human development indices even though "they do not export oil and are poor in minerals". Adding that, the drivers of economic and social development were economically diverse and oriented toward exports.
According to the report:
"In the 2012/13 fiscal year, Ethiopia’s economy grew by 9.7%, the tenth year in a row of robust growth. In 2012, Ethiopia was the twelfth fastest growing economy in the world. Average annual real GDP growth rate for the last decade was 10.9%. Agriculture, which accounts for 42.7% of GDP, grew by 7.1%, while industry, accounting for 12.3% of GDP, rose by 18.5% and services, with 45% of GDP, increased by 9.9% in 2012/13. This momentum is expected to continue in 2013/14 and 2014/15, albeit at a slower pace because of constraints on private-sector growth.
In an effort to combat inflation, the government pursued a tight monetary policy stance using base money as the nominal anchor to control monetary expansion. This measure, in the context of a slowdown in global commodity prices, resulted in annual consumer price inflation of 7.9% in November 2013, compared to 39.2% and 15.6% in November 2011 and 2012, respectively. The government’s determination to reduce inflation was further reflected in the pursuance of prudent fiscal policy focused on strengthening domestic resource mobilisation and reducing domestic borrowing. The strong fiscal stance, particularly measures to improve tax administration and enforcement, contained the fiscal deficit at 2.0% of GDP in 2012/13 compared to 1.2% of GDP in 2011/12.
Between 2011/12, merchandise exports totalled USD 3.1 billion, posting a 2.3% decline from the previous fiscal year and decreasing from 7.4% to an estimated 6.5% as a share of GDP. The value of imports, mainly from Europe and Asia, increased from about USD 11.1 billion in 2011 to USD 11.5 billion in 2012/13. With imports rising faster than exports, the trade deficit deteriorated to USD 8.4 billion in 2012/13, from USD 7.9 billion in the previous year. However, the overall balance of payments deficit in 2012/13 decreased significantly, down by 88% compared to the previous year, mainly due to a good performance in other accounts (surplus in the non-factor services trade, huge private transfers and the surplus in the capital account).
Though the stock of external debt as a ratio of GDP increased from 21.6% in 2011/12 to 24.3% at the close of 2012/13, the country remains at low risk of external debt distress. Rebuilding gross official foreign reserves has, however, resurfaced as a challenge because foreign exchange reserves fell to less than two months’ of import coverage."
The Report had also mentioned several specific policy achievements. For example: It noted, in 2010 the relocation of the Turkish company Ayka Addis Textile and Investment Group created more than 10,000 jobs in the country. And, it triggered the relocation of 50 other Turkish textiles and apparel companies to Ethiopia - which is expected to create more than 60,000 jobs.
Regarding entrepreneurship and collaboration between public and private actors, the report cited Ethiopia as an model. It stated: "Effective collaboration requires strong business associations. The Ethiopian textile and garment manufacturers association, for example, has become a critical partner for government and for international lead firms such as H&M. The association has helped shape the government’s set of policies supporting the sector and been a partner to H&M in building capacity for meeting quality standards among local firms."
In terms of governmental measures that facilitate trade and ebhance exports. The report acclaimed Ethiopia as follows: "Reforming customs and border procedures can ease trade transaction costs and contribute to development. In Ethiopia, for example, national customs reforms increased imports and exports by 200% and tax revenues by over 51%."
According to the data in the report, tax revenue increased by 24.8% in 2012-13, and it also increased as a ratio of GDP, by 0.1 percentage point from 11.6% in 2011/12 to 11.7% in 2012/13. Improved domestic revenue collection enabled the government to finance 81% of its expenditure from domestic sources in 2012/2013.
The report also noted Ethiopia's achievements in macroeconomic policies including the government’s efforts to minimize the rate of inflation with “prudent fiscal policy better coordinated with monetary policy to combat inflation, while maintaining momentum of spending in physical and social infrastructure.”
The report also disclosed that the latest debt sustainability analyses showed Ethiopia would remain at a low risk of external debt stress and would also remain at low risk of debt stress in 2013/14 and in 2014/15.
A similar testimony was provided in the World Bank Report last month. The report, entitled “3rd Ethiopia Economic Update: Strengthening Export Performance through Improved Competitiveness” stated that:
"Across all countries and time, on average, for each additional 10 percent RER undervaluation, the country’s export growth goes up by 0.6 percentage points and its output growth goes up by 0.88 percentage points a year. In the case of Ethiopia, a 10 percent undervaluation would potentially boost exports by 5.2 percentage points and economic growth by 2.2 percentage points."
In terms of sectoral performance, the World Bank attested that: "GDP growth increased by 9.7 percent in 2012/13 compared to 8.8 percent in 2011/12. Industry grew by 18.5 percent followed by services (9.9 percent) and agriculture (7.1 percent). However, given the relative size of each sector, expansion of the services and agriculture sector explain most of GDP growth (4.5 and 3.1 percentage points, respectively), while the contribution of industry was relatively modest (2.1 percentage points). Manufacturing, which forms part of the industry sector, added just 0.4 percentage points to the overall growth rate of 9.7 percent."