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The two decades that proved the Ethiopian model

By Mesle A.
Tigrai Online, Ethiopian News, May 23, 2016


The 28th of May 1991, was a transformative day in Ethiopian history. The day ushered a new beginning that heralded the end of Ethiopia’s downward spiral and the long walk to return to its ancient glory. A study of the economic progress of the last two decades gives recognition to several aspects of Ethiopia's developmental endeavor and achievements.

One of the reasons for Ethiopia’s economic success is that, Ethiopia for two decades has implemented well-designed five-year economic plans with a serious effort to make them participatory as well as mobilizing the public for the implementation. The state guided the formulation of the vision and strategy or plan but, consulted closely with private firms, which in the end will be the main implementers. This required a state that has the drive and capacity to play the traditional state roles in economic management and to collaborate with business in pursuing specific transformation initiatives.

A national vision and strategy can inspire citizens and mobilize their support for sacrifices in the early stages of economic transformation. The strategy can also clarify the interrelationships among government branches and between relevant government and private activities; thus, improving information, understanding, and coordination among key actors in the economy.  And, the targets in the strategy can make it possible for citizens and businesses to hold government accountable for results. Ethiopia has been explicitly praised in the international community with regard to pro-poor spending and national ownership of developmental plans.

As a 2014 report on African transformation states:"Sub- Saharan countries have in recent years begun to take the lead in producing medium- and long-term plans more focused on the growth and transformation of their economies. In Ethiopia, Ghana, and Rwanda the new plans result from the country taking more ownership of the poverty reduction strategy process". The report restated that, other African countries should learn from this Ethiopian experience; "above all, the need for leadership at the highest levels to make projects happen.  Two other key lessons are, to target sectors in the economy’s comparative advantage and to integrate various elements of a transformation strategy. Taxation, power generation, and skills training had to come together to make the project work. Investors can also learn that, producing and exporting profitably in Africa is possible and that, with government support and citizen motivation, the traditional barriers to business on the continent can be overcome."

The prudence of Ethiopia's developmental path was demonstrated in several ways. One of them is land ownership and administration system. Africa’s comparative advantage in agriculture and agro-processing is not being realized because; modern commercial farmers have difficulty gaining access to land due mainly to the communal land tenure. In other regions of the world, a small number of landlords controlled large tracts of land while, many in the rural areas were landless—so the solution was to redistribute land. In the meantime, potential investors in modern commercial farming should get access to land in ways that avoid complicated and prolonged disputes, but that also respect the rights of communities and the environment. For example, Ethiopia’s cut flower export industry was greatly facilitated by the government’s helping the first foreign investor obtain land. This was easier in Ethiopia where all land is vested in the state.

Another success lauded by international organizations is that, Ethiopia launched an educational and sill developmental system with a strategic direction for education and training to focus on preparing a workforce that the industry demands. It was proven that, emerging markets such as China, Brazil, Indonesia, etc. had put skill building at the core of their transformation agendas. Therefore, sub- Saharan countries need to do the same if they are to ignite and sustain their economic transformations. According to one report, Ethiopia and Rwanda are the main ones doing just that, putting their efforts and their resources into raising education performance. They have also identified the strategic economic areas where they have potential comparative advantages, and they are rapidly building the skills critical to turning that potential into real competitive market advantages.

Another important point that marked Ethiopia’s model was that, Ethiopia's Development Bank is one of the few well-performing state banks in Sub-Saharan Africa. It is well noted that, African countries efforts to establish a bank to finance developmental efforts had mixed results: Some collapsed and some were justifiably privatized in the wave of privatizations in the 1980s and 1990s. Others remain but, with the possible exception of the Development Bank of South Africa, the Botswana Development Corporation and the Ethiopian Development Bank, they are not doing much to support economic transformation. This can only be the result of prudent monetary management of the Ethiopian leadership, despite the suggestion by some neo-liberal pundits that Ethiopia should leave the economic leadership to academics and private sector.

The 2014 African transformation report has stated that: “Since almost any serious transformation initiative would cut across several ministries and agencies close coordination is needed. This can be done only by an agent whose authority is accepted by other ministers and by the staff other ministries and agencies. Even the United States, that great proponent of free market, has the National Economic Council under the Office of the President. It is difficult to find institutions playing comparable roles in Africa. But some countries are taking steps to improve coordination of economic policy and implementation in government. Notable examples are Ethiopia and Rwanda, where the heads of governments—the late Meles Zenawi in Ethiopia and Paul Kagame in Rwanda—play very active roles in economic policy coordination."

Growth with depth is not mechanical. It requires effective implementation of creative strategies, unique to each country’s circumstances. While there is no specific formula for economic transformation, there is some agreement on policies, institutions, and approaches that have been important in driving the transformation of successful countries. These include: Increasing state capacity for macroeconomic management, public expenditure management, and guiding economic transformation; Creating a business friendly environment that fosters effective state-business consultation and collaboration on economic transformation; developing people’s skills for a modern economy; boosting domestic private savings and investment; attracting direct foreign investment; building and maintaining physical infrastructure; promoting exports; facilitating technology acquisition and diffusion; fostering smooth labor-management relations; identifying and supporting particular sectors, products, and economic activities in each country’s potential comparative advantage.

The developmental path we have followed since May 28 and the successes so far achieved are reminders of what we shall do to sustain the growth trajectory, and they are also a re-affirmation of the developmental path we are pursuing day and night. Ethiopia’s model has been proved to work, and it’s time to recognize as its origin lies on the 28th of May, 1991.

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