Charter revision underway
Members of Parliament (MP) representing Dire Dawa city administration requested the House of Federation (HoF) and House of Peoples’ Representatives (HPR) to restructure Dire Dawa’s governance status either as an autonomous regional state or place Dire Dawa under either Somali or Oromia regional states. The call came as the Dire Dawa city administration faces a serious budget shortage.
The MPs raised the question during the joint session of the two houses on January 11, 2023, in Addis Ababa. The joint session was convened to pass a new property tax bill that day.
“Dire Dawa is not eligible to benefit from the federal tax allocation schemes because it is not a regional state. As a result, the administration is unable to provide even basic services to the population,” Abduljewad Mohammad, one of the two MPs representing Dire Dawa in the HPR, said. “Therefore, the current administrative status must be changed.”
Located between the Somali and Oromia regional states, the EPRDF government has had direct rule over Dire Dawa since 2004, in order to avoid claims from both the Somali and Oromia regional states. Similar to Addis Ababa, Dire Dawa has a charter and answers directly to the federal government.
As a result, almost all tax revenues generated by the city go to the federal government’s coffers. But for regional states in Ethiopia, the HoF has revenue sharing formulas that enable fair sharing of revenues between the federal and regional governments. But Dire Dawa cannot take part in the revenue sharing plan because it is not a regional state.
All private limited companies in Dire Dawa directly pay income taxes and other taxes to the federal government. Hence, the administration does not have its own tax base. If the city administration works hard on the small tax base under its mandate, the maximum tax it can raise is between 1.5 billion and two billion birr.
The federal ministry of revenue and customs commission branches in Dire Dawa collects significantly higher taxes from businesses. But all that tax goes to the federal government and is not shared with Dire Dawa, according to data The Reporter obtained from officials of the Dire Dawa administration.
The city survives on a small portion of the budget’s subsidy allocation. This small budget is allocated based on the will of the Oromia and Somali regional governments, which range annually between one billion and 1.6 billion birr, on average, according to the data.
It has a huge tax revenue potential due to the heavy manufacturing industries and the number of import-export businesses based in Dire Dawa, according to the city’s officials. It is also a major international trade hub for Ethiopia and Djibouti. Dire Dawa is just 300 kilometers away from Djibouti Port, which handles over 90 percent of Ethiopia’s international trade volume. Despite all these tax sources, the city does not have its own tax base.
“Dire Dawa raises a substantial amount of revenue. But most of the revenue collected goes directly to the federal government. So our question is whether it must be considered a regional state to be eligible for the shared budget formula. The question has been rejected by the federal government for a long time,” Abduljewad told The Reporter.
The Dire Dawa city administration is currently facing a serious budget shortage, reversing its economic growth. Without this system, it could have advanced much further. Despite the fact that we have been asking this question for fifteen years, the administrative structure has not been resolved.
The federal government, the HoF, and Parliament have been arguing that it cannot become a region and benefit from the federal shared revenue allocation formula unless Ethiopia’s constitution is amended, according to the officials.
On the other hand, the Dire Dawa administration’s resources could not meet the growing demand from the surrounding population. “The administration governs both urban and rural populations. The population needs public services like health care, education, and infrastructure expansion, among others,” the MP said.
The population of the surrounding zones in Somali, Oromia, and even Djibouti, gets basic services from Dire Dawa, the MP says. “The administration is under growing pressure from demands from the neighboring society. For instance, Dilchora hospital in Dire Dawa serves not only the population of Dire Dawa but also the surrounding regions. The same is true for the schools.”
Addis Ababa, like Dire Dawa, is administered directly by the federal government under a charter, but the state of resource benefits in Addis is incomparable. Addis Ababa is the seat of the federal government and has numerous options to access resources. It is even allowed to take on debt to finance its development endeavors.
The federal government also intervenes and implements various projects in Addis Ababa. To the contrary, the Dire Dawa city administration pays right-of-way compensations for federal projects in its city. The government could not manage to invest in the city’s growth potential and benefit from it.
Responding to the requests of the MPs, Agegnehu Teshager, speaker of the HoF, and Ahmed Shide, minister of finance, stated that the HoF will solve the case in the future.
However, officials are concerned that the problem will persist because it will necessitate rewriting the constitution. They are also hopeful that the issue can be resolved through the national dialogue.
So far, the HoF, HPR, or federal government, have not taken any action to address the case. But federal government officials say they are aware of the problem and have promised to look into it. The only discussion currently underway is the revision of its charter.
The administration is formulated under an arrangement in which Somali and Oromia rule interchangeably for four-year terms. When it is Oromia’s term to govern, more public investments, such as housing, are seen on the Oromia side of Dire Dawa. On the contrary, more progress is seen on the Somali side, such as in Shinelle, when the four-year Somali term arrives.
These two regional states have strong claims over Dire Dawa, which has sensitized the issue and made it difficult for the federal government to make a decision.
“I cannot dictate whether Dire Dawa should become an autonomous regional state by itself or become part of Somali or Oromia regional states. These are the most common options, but the ultimate decision should be made based on the interests of the people of Dire Dawa. This needs studies and deep discussions with the Dire Dawa population and requires a political decision,” Abduljewad said.
He says the move might require a referendum since it is a public question. “My role is to present the question of the Dire Dawa people to the houses and the federal government,” added Abduljewad.