The economic development terrain is undergoing a rapid change, triggered by geopolitical reshuffle. This has prompted a change in the international aid modality. The US and UK have officially shifted the focus of their international aid from government budget support and project financing to incentivizing Multinational Corporations to invest in Africa. These have significant impacts on Ethiopia’s development agenda, writes Yonas Biru.
These are the best of times and the most challenging of times for Ethiopia.
On the positive side, nationally, the ongoing reforms have rekindled the people’s hope for a brighter future. The government’s pronouncements and initial steps to privatize state-owned enterprises and promote market-driven economic policies have sown a sense of optimism in the private sector.
More importantly, the value of Ethiopia’s strategic real estate in the Horn of Africa’s geopolitical landscape is set to appreciate exponentially, as the bidding for control of the region heats up between China and Russia on the one hand and the US and its ecosystem of allies on the other.
This is bound to provide Ethiopia with access to an abundance of international aid from countries who see its stability and prosperity as an integral part of their national interest, most notably the US, UK and the Gulf States.
On the negative side, there are a host of political and economic problems. The youth bulge that is dominated by ethnically-charged and restive unemployed college and high school graduates and the lagging job creation have become an urgent concern to Ethiopia and its partners.
There are also structural challenges. Nascent and poorly regulated financial institutions and the general lack of access to credit for entrepreneurial endeavors are formidable challenges. Lack of reliable and sufficient energy supply, underdeveloped industrial base and low productivity in agriculture also represent structural hindrance for development.
The pessimism of the now (burdened by localized conflicts and high unemployment) and the optimism of the future (triggered by the ongoing reforms) are competing for political space. The government’s effort to navigate the tension between the two must focus on forging an economic vision embedded within the larger bedrock issues of the future.
In 1992, Bill Clinton won the US presidency embracing “It Is the Economy, Stupid” as his campaign’s slogan. The message was that political ills are best cured with economic pills.
The government needs to inspire the people’s confidence about the economy’s future and restore the nation’s morale to recapture its destiny. It needs to formulate an economic vision along with a clear strategy, coherent policies and a roadmap to reach the envisioned goal. It needs to speed-up and scale-up its privatization process and corruption crackdown initiative. These are crucial to douse the flames of pessimism and set the country on the path toward accelerated growth.
On bedrock issues, it behooves us to pose the following questions: What should Ethiopia’s economic vision for the future be, say for 2050? Can we envision Ethiopia as a technology hub for Africa? High-middle income country? Home for medium-sized conglomerates?
Most Asian countries that have registered accelerated growth started with a clear vision that their critics at the time considered an unattainable dream, if not an exercise in futility.
In 1960, Korea forged an economic vision to be a home for large conglomerates. In 1960, Korea’s GDP per capita in current US dollars was USD 158, lower than that of Ghana (USD 182) and slightly higher than the average for Sub Saharan Africa (USD 130). In 2017, its was about USD 30,000, compared to a USD 1,554 average for Sub Saharan Africa.
In the early 1980s, China’s vision was to be the manufacturing hub of the world. Its GDP per capita was a meager USD 197, below that of Ethiopia. China has not only achieved its goal, but has since upgraded it to control the world trade by building the “21st Century Maritime Silk Road.”
India has a similar story. In the early 1990s, its GDP per capita was not much higher than Ethiopia’s. But its dream to become “the skill capital of the world” was infinitely bigger. In 2018, it is within a striking distance of achieving it in terms of dominating the global software development industry.
Two important traits that China, India and Korea shared were their steadfast beliefs in their respective visions and their uncompromising stand about their authorship and ownership of their economic visions, strategies and roadmaps.
African countries must reclaim their destiny and start rejecting the low expectations that have been normalized in their development strategies and policies.
After 50 years, and hundreds of billions in international aid, Africa’s development efforts leave much to be desired. In the 1970s, Africa accounted for over three percent of global manufacturing output. In 2016, the figure has fallen to 1.5 percent, according to the Economist Intelligence Unit.
As bad as Africa’s share of global manufacturing output looks, it is better than its stake in the fast-growing global capital markets. In 2017, Sub Saharan Africa (barring South Africa) was the only region that did not even register a microscopic blip on the radar screen of the USD 77.57 trillion global capital markets.
If the past is prologue for the future, it can be said with a sufficient degree of confidence that “piecemeal”, and/or “gradual” reforms will not bring about the transformative changes that Africa badly needs.
Ethiopia is at a critical juncture in its history. The ongoing political reform has sparked a positive national psychology for a transformative change.
Inspired by the positive spirit, this writer along with Professor Lemma W. Senbet (The William E. Mayer Chair Professor of Finance at the University of Maryland) co-authored a proposal to establish an independent Ethiopian Economic Advisory Council (EEAC) to engage the diaspora in the reform process. The proposal was reviewed by a Steering Committee consisting of local and diaspora experts and reflects inputs provided by them.
The objective is to support the government in “formulating a vision and long-term economic strategic direction; articulate an integrated set of clear principles and priorities; and develop a clear short- to medium-term road map for accelerating economic growth and employment generation.”
The Proposal is anchored in an interdisciplinary approach to development, bringing together diaspora and local experts in different disciplines, including macroeconomics, agriculture, industry, energy, technological innovation, finance, etc. Its aim is to build a critical mass of complementary and mutually reinforcing reforms.
Its approach includes: forging global development partnerships with leading universities, think-tanks, and corporations with track record and interest in developing countries; leveraging the new international aid modality; building centers of excellence for innovation; improving the effectiveness and accountability of the public sector; and establishing a private-public partnership in the policy space.
The timing is right and the stakes are high. In the last 6 months, Ethiopia has received USD 4.2 billion from its international partners. Plans are underway at the International Finance Corporation (IFC) and the US government Millennium Challenge Corporation (MCC) for additional financial support.
These are precursors for plentiful international aid in the coming years. Most importantly, massive foreign direct investment is bound to flow to Ethiopia, enticed by loan guarantees by the US and UK governments and other donor agencies.
Though these are reasons to celebrate, we would be remiss not to temper our celebration with the acknowledgment that foreign aid, no matter how massive, does not necessarily translate into progress. It is important to channel available resources into areas where the multiplier effect is greater and the spillover effects are wider to scale the country’s economic activities.
Experiences from China, India and Korea suggest this requires having a clear vision and a roadmap to bridge the vision, strategic priorities and goals set forth. In this endeavor, the Ethiopian diaspora community can serve as a kernel extension of the nation’s knowledge base.
Three questions force themselves upon us: Why an advisory council? Why should it be independent? Why the diaspora?
The economic development terrain is undergoing a rapid change, triggered by geopolitical reshuffle. This has prompted a change in the international aid modality. The US and UK have officially shifted the focus of their international aid from government budget support and project financing to incentivizing Multinational Corporations to invest in Africa. These have significant impacts on Ethiopia’s development agenda.
The EEAC “can help mitigate potential risks and threats that are inherent in a period of geopolitical uncertainty. It can also help position Ethiopia’s strategic development agenda to take advantage of the new international aid paradigm.”
Why an independent council? Independent advisory councils are common in emerging countries. Their purpose is to supplement not supplant the country’s National Planning Commission or the Office of the Chief Economic Adviser of the Prime Minister.
As the proposal notes, the primary reasons for independent advisory councils “often include acquiring independent policy advice from non-governmental experts, seeking alternative visions, strategies and policies to expand the government’s policy choice sets, enriching the debate in the country’s development discourse and creating synergies for best solutions.”
Why the diaspora? The diaspora is an integral part of the solution. Invariably, countries that have succeeded in their development efforts are those who relied on their own people, diaspora and local, rather than on foreign consultants.
The objective of EEAC is “to create synergy in collaborative efforts and leverage the talents of all Ethiopians and people of Ethiopian heritage” at home and abroad.
As the World Economic Forum noted, “India’s high-tech industries were to a large extent created by returning migrants and are deeply connected to the diaspora…” Ethiopia, too, should make good use of its diaspora as a matter of priority for its economic development.
The Ethiopian Diaspora is well represented at prestigious universities, including the US Ivy Leagues, in the faculty ranks. There are many internationally acclaimed experts at the forefront of their disciplines in finance, agriculture, corporate governance, health, technological innovation, etc.
Others are engaged in high-level management and research positions in premier international organizations and US Federal government. Some are authors of award winning books and sought after speakers in international conferences. Still others are advisors to high-level US government officials.
The diaspora is actively involved in Ethiopia’s development. For example, a young Harvard professor (Jelani Nelson) has established AddisCoder, an intensive summer program in Ethiopia to introduce high schoolers to computer programming and algorithms.
Diaspora doctors have organized “People to People” whose primary purpose is to serve as a “bridge to transfer knowledge, technology and experience.” Its founder, Enawgaw Mehari (MD), was nominated as CNN Hero in 2007.
Vision Ethiopia coordinates annual conferences to promote dialogue on post-conflict transition in Ethiopia. There are many such individual and group diaspora initiatives.
The EEAC proposal provides a well-structured, integrated and interactive forum to scale these and other similar initiatives for broader impact across the economy.
The organizational arrangement of EEAC can best be described as a cascade of three concentric circles. At the center is the Core Team that will be stationed in Addis Ababa, comprising of 10 to 12 local and diaspora experts of international and national repute with expertise in priority areas that are key for the development of the country.
The second concentric circle represents a network of satellite Interdisciplinary Advisory Teams, consisting of subject-matter experts, reflecting the various focus areas of the core team. Organized by disciplines in 8 sub-teams, the experts will focus on urgent and strategic issues in their expertise.
The third and the outermost circle consists of International Partners, including universities, multinational corporations, and global foundations. For instance, Google has a program that is committed to advance Africa’s digital transformation. Microsoft, Cisco, and many other corporations have similar initiatives. Established and connected members of the diaspora can serve as interlocutors between Ethiopia and such corporations, universities, foundations, and think tanks in their host countries.
The challenges are formidable, but not insurmountable if the right strategies and policies are put in place. The opportunities are plentiful and could be impactful, if properly managed. Connecting the dots and strengthening the thread that goes through them is getting halfway closer to tying a bow around a strategic vision that will transform Ethiopia.
Ed.’s Note: Yonas Biru (PhD) was the Deputy Global Manager of the International Comparison Program at the World Bank. The views expressed in this article do not necessarily reflect the views of The Reporter. He can be reached at [email protected].