The Dangerous Hype behind the Ethiopian Commodity Exchange (or Commodity Invasion?) – By Seid Hassan, Murray State University

July 29th, 2009 Print Print Email Email

It is our hope that many Ethiopians have watched the PBS/WNET documentary film under the title of The Market Maker/Wide Angle, which was broadcast beginning on July 23, 2009. (more…)

It is our hope that many Ethiopians have watched the PBS/WNET documentary film under the title of The Market Maker/Wide Angle, which was broadcast beginning on July 23, 2009. This documentary followed the Ethiopian economist, Dr. Eleni Gabre-Madhin who is the CEO of the relatively newly established Ethiopian Commodity Exchange. Many of us were waiting for the documentary to show us how the ECX could “… transform the Ethiopian economy by becoming a global commodity market of choice,” as claimed in the ECX’s main web page. That was not to be.

We were disappointed (but not surprised) by the failure of the documentary film which failed to show us the difficulties that the ECX has and would face, let alone Dr. Elin’s failure to explain to us how the ECX could “transform the Ethiopian economy.” The anchor of the documentary, a renowned journalist Mr. Aaron Brown opened the discussion by asking a question HOW the commodity exchange would lift the millions of Ethiopian poor farmers out of poverty. We were anxiously expecting Dr. Eleni to explain to us how many millions illiterate peasants would read the coded commodity prices and use them to their advantage; how the ECX could function and survive in a country where free markets are non-existent; explain to us the mechanisms whereby the peasants would be able to obtain the necessary information about markets in a country where the independent media is slummed shut by the government authorities, a country where the limited media outlets (one of the poorest and lowest penetration rates in the world), such as the telephone, internet, radio, TV, newspapers are totally controlled by the government. For those who don’t know the Ethiopian situation, we would like to inform them that even those who have access to the limited both the electronic and print media are so fed up with the government’s endless lies and false propaganda that they only pay attention to those foreign-owned and operated media outlets such as the BBC, VOA, Deutsche Welle, al-jezeera and the Eritrean TV.

Moreover, those of us of Ethiopian origin were expecting the documentary to show us the difficulties and lack of coordination between market participants. In particular, we were expecting the producers of the documentary to have gone deep into the rural areas of Ethiopia and show us the daily lives of the peasants, their unbearable poverty, the meager outputs they produce, and how they “dump”, which is true to this day, their small products to any price they could fetch during harvest times, how they would be able to know what the ECX is (let alone their lack of understanding how it works). It was not to be.

As Thomas Paul who had watched the documentary aptly put it, the documentary failed to show the criteria for success, the market inefficiencies before the implementation of the ECX, how one could measure the benefits of an efficient trading system. The same observer also noted that Dr. Eleni failed to show any raw data supporting the ripple effects of market efficiencies that she talked about, the impacts of the price variances, the challenges, and implementation strategies. Most importantly, both the documentary and Dr. Eleni failed to show us what kind of regulatory schemes exist to build trust, which is a paramount currency in a (newly formed) commodity exchange system. The initiative is a start, assuming that all the necessary ingredients are in place (which is not the case), but it is far from the success story the documentary tried to portray. The same astute observer also noted: “The benefits and theoretical advantages of making trading easy, is a function of trust which in turn is a function of independence from the hands of the government. … “[W]hat was glaringly evident was that the system has so far failed to win the trust of stakeholders, as evidenced by the governments’ abrupt shut down of an efficient auction system by which coffee was traded previously. As soon as stakeholders, farmers and merchants alike, were forced to transact through the ECX, they went underground. Some were accused of ‘hoarding’ and thrown in jail…” [Taken from a message posted on Ethiopian Email Exchange Network, posted on July 23, 2009.]

Let us briefly delve into some of the characteristics of a commodity exchange system and relate those characteristics to the ECX. In this particular article (our first installment on the issue), we show that the ECX is neither a Free Market based transparency and a level-playing field, nor it is intended to be, at least from the government’s stand point.

Since its establishment, which began its operation in April of 2008, the ECX has never been a free exchange market. The description “free commodity exchange market” was and still is just a PR stunt and a pretext to hoodwink donors and unsuspecting public. We know free markets galvanize private resources by bringing those who are willing and able to buy and sell when they try to maximize their own individual utility. We also know and understand that commodity exchange mechanisms could play vital roles provided that they are set up properly and allowed to function with minimal interference by the authorities. By the same taken, the ECX could alleviate, but not transform, some of the problems that the Ethiopian economy is in, again, provided that all the necessary conditions that will make a “free” commodity exchange to function properly. But there are a number of both conceptual and practical problems with the EXC.

A. Transparency: For more than a year, we have been looking for the identity of the officers and regulators of the ECX. As everyone knows, such a disclosure of the identity, background and financial interest of the individuals and the businesses involved in the exchange is paramount to the well-functioning and transparency of any commodity and financial exchange institution. We are happy to see, after more than a year of not doing so, the ECX putting out the identity of the officers, the regulators and trading members on the official website, but a detailed public record of those individuals and companies is necessary.

B. Market Information (lack of): The ECX on its only official website claims information being delivered all over the country through Radio, Television, and SMS. But it failed to inform us that there is no privately owned media infrastructure in the country. It failed to honestly inform the reader and the observer that not only the government owned and operated media outlets are biased but their usefulness to market participants is almost non-existent (for example, the internet penetration rates as compared to the rest of the world is only 0.02%!) The claim that market information is transmitted all over the country is, therefore, misleading and false.

C. Credit: Transparency of financing is a critical component of commodity trade. However, in addition to the listing of some of the ‘private’ banks, it is important to fully disclose the role of the government and the involvement of the ruling party owned credit establishments, particularly their relations to the private banks.

D. Storage: As a government agency, the ECX owns and operates the largest storage facilities. In so doing, it enjoys complete dominance in the storage of commodities throughout the country, thereby making this same government agency the price-maker. Everyone involved knows that impartiality to the private traders does not exist and the government is crowding out private storage operators. Moreover, another government agency, the Ethiopian Grain Trade Enterprise (EGTE), which is the largest grain purchaser in the country, is a member-trader of the exchange, owns major storage, transportation facilities throughout the country and directly competes against private traders. It has been recently disclosed that the EGTE destabilized the commodity market, due to its market dominance and the preference it gets from the government, and yet, no mention of this fact is made by the CEO of the ECX.

E. Transportation: As mentioned earlier, the dominance of the Ethiopian Grain Trade Enterprise and the ruling party owned transportation operators are equally mentioned as private operators but they actually dominate its control. Such unequal relationship and favoritism is not only contrary to the normal operations of a market but the lack of disclosure their dominance, favoritism party owned parastatals, and their unfettered access to government regulators exacerbates the lack of trust on the part of the ECX.

F. Regulation: The government officials who are listed as regulators, including the Prime Minister’s involvement in the ECX’s affairs are the major causes of market destabilization and the failure of the exchange as a market institution.

In addition, the ruling party affiliated traders, financers, transporters, and exporters should have been banned from the exchange. The Prime Minster as the leader of his party must disclosed his party owned enterprises and their financial interests to the public before they are permitted in the exchange. Moreover, the ECX should have disclosed the names of the donor countries and international institutions that are financing the establishment of the exchange, including their financial interests and how they would be accountable for any improprieties that either their agents or those whom they support could commit. They should have demanded the disclosure of the financial interests of the officers as well. Unfortunately, none of the above disclosures are made so far, thereby creating an appearance of conflict of interest.

We conclude, therefore, based on the problems we listed above and other issues, there is a lack of market information, lack of contract enforcement, and a lack of trust on the ECX. In particular, the asymmetric information (those who are close to the government possessing all the information and outright favoritism) has been damaging to the ECX and will continue to be so.

Furthermore, let it be known that no commodity exchange will work (let alone function and assist the 82 million Ethiopians) without transparency and accountability. Let it be known that there are no commodity exchange markets that have flourished under repressive, parasitic, nepotistic and oligarchic regimes as it exists in Ethiopia. Let it be known that there is no “free commodity exchange” where repression is the order of the day, where the Ethiopian people are so petrified by the repression of Meles Zenawi’s regime that they are leaving their country in drones. We believe there are better ways to feed starving Ethiopians, currently over ten million of them being dependent international food aid. Let it be known that a commodity exchange, no matter how glittery it may seem, will not work in a malaise economy and with people under increasingly grinding poverty.

Let it be known that there is no true commodity exchange in a country where group of people who claim to represent a minority ethnic group, who have illegally transferred the means of production to themselves and the parastatals they fully control. Let it be known that the ECX adventure has been an exercise in futility, in part because the circumstances for a true commodity exchange system to function do not exist and in part because, as it became evident by Meles Zenawi’s “cutting of the hands” of the Ethiopian coffee exporters, the entire exercise is designed to have full control of the commanding heights of the Ethiopian economy.

It is also about time for those renowned journalists to speak on behalf of their colleagues, members of the Ethiopian independent media whose businesses have been closed, who have languished in the prisons of Meles Zenawi with concocted up charges and who have been forced into exile. There is no and cannot be a free commodity exchange market under such repressive circumstances.

It is about time to recognize that millions of Ethiopians get hurt with such gimmickry and uncalled for hypes. … Let it be known that the ECX is another well orchestrated gimmick, one of those government set up mega projects which are designed to control both the outputs and prices of the Ethiopian farmers, particularly the commodities which are the source of foreign exchange. Let be known that, as the saying goes: “all that glitters is not really gold!”

Let there be no more hypes, no more deceptions. Most importantly, it is time for those enablers of Meles’s greedy and kleptocratic regime that the creation of hypes real consequences. As a gimmickry mega project, the ECX has been and will be used to both squander the meager resources of the country and as means of controlling the outputs of the Ethiopian peasants. Let it be known that those who are a part of this process, including those at the helm of the ECX will be accountable for what they have done to Ethiopia and its people.

The author and his collaborators could be reached at:Seid.hassan@murraystate.edu

  1. game plan!
    | #1

    This shows clearly who stands to benifit! Why do we have an”angloamerican” advocating this weyane half cooked staff! In my understanding, it is the speculative traders! the casino economy merchsnts! which runs the show!
    Fox, we, Ethiopians are waking up and should fight this Fashisim(corporativism) which has aken us by stealth!
    Internationalisation of Crime! Is their a better explantion of the behavior of Weyane than the narcotrafficking-Gangsterism out their!
    http://www.lubrinco.com/articles/NYU%20Journal%20of%20International%20Law%20and%20Politics%20Vol%2034%20No%201.pdf

  2. Alex
    | #2

    TO SIED HASSEN: LEAVE ALON ERITREA AND WHY YOU MENTIONE ERITREA AS A PROPAGANDIST? ARE YOU STILL THINK TO ANOTHER BLODESHED AMONG PPL OF ETHIOPIA AND ERITREA? WE NEED PEACE WITH ALL OUR RIGINAL CUNTRRY. NO MORE WAR. AND WHY YOU NEED HATE AMONGE PPL BY SAYING ERITREA ONE OF PROPAGANDIST WITH OTHER`S? PLS IF YOU AFRIED ALAHE BE ONE OF THE PPL WHO WISH AND NEED PEACE AND HARMONY FOR BOTH PPL! WHY YOU BECOME AN INSTRUMENT FOR THE WORK OF DEVIL BY SAYING ERITREA ONE OF THAT YOU MENTION`S CANTRY A PROPAGANDIST TO DISMANTEL ETHIOPIA! WE ERITREAN LOVE ETHIOPIA AND ALL THE BELOVED PPL OF ETHIOPIA. AS I AM UN ERITREAN I WISH AND PRAY ASK GOD TO BLESS MAMA ETHIOPIA FOREVER. AND GOD BLESS YOU TO. BARAK ALAHE FIK( EGZIABEHER BALEH LAY YEBAREKH). GOD BLESS OLSO MAMA ERITREA FOREVER.

  3. mateos
    | #3

    There are numerouse things Abebe/Legesse/Melesse and his boss, Bereket, that they mastered in the past 18 years– their first 17 years before that in the jungle of aiga was how to kill and loot. They mastered how to confuse the average Ethiopian with-in and with-out, they have mastered how to prostitute to western countries, they have mastered how manupilate the peasants and wild animals of Ethiopia; HOWEVER, the diaspora took nearly 16 years to figure out the true colors of the weyane mafia family. IT WAS 2005 THAT TRUELY EXPOSED THE NATURE OF THE BUTCHERS IN ADDIS AND AROUND THE WORLD. Whatever they say and however they say it from that year after is just hookwinkling for the peasants of Ethiopia and the donor countries who are using and abusing the PEACE YEARNING AND HUNGRY PEOPLE OF ETHIOPIA. Weyane mafia family days are nearing by the clock; they will be caught and brought to the court of law with in Ethiopia and there will be peace in the entire region of the horn of Africa.

  4. ANDNET BERHANE
    | #4

    first of all the commodity exchange you should have to study how to get the market to bring a sell and a buy and allso to know the meaning of the commodity the manufacture production of goods and generaly farming market information credit storage transportation but as dr eleni try to be humbel and she want to be as other economist they do magnifshent out come not with supperse government plan dr mahmud effort to help poor indevugal in bangladish from their pocket not get help from those create poor but you are helping the fall ethinic federalism fabrecated commedity exchange we see the face of thos poor you call them humera farmers the land taken by force from the welkit tesgede for the interst of EFFORT the meaning donation finantial supervision(watchdog)tigrai who are a part of this process including those at helm of the ecx willbe accountable for what they have done to ethiopian and its people

  5. Lemlem Kiros
    | #5

    The so called Ethiopian Commodity Exchange is one arm of the weyanne ethnofascists to control and loot the resources of the country. The ethnofascists know that controlling the economy is indispenseable to maintain their discriminating and racist rule in Ethiopia. Ethiopians should realize that the ethnofascist Tigrayan supremacists are in their country to loot their country`s resources. The ethnofascists are causing tremendous suffering through their control of the economic and political lives of Ethiopians.

  6. tewbel
    | #6

    The Woyane’s having a full grip of the economy, whatever organization they setup will serve only thier corporate monpoly on all trade.

  7. Nagasso Gidada
    | #7

    The ECX is one other institution by which woyane is legitimizing the highway robbery of Ethiopian peasants through brokering of coffee, hide and other leather products, livestock – in addition trading of other commodities robbed from Ethiopians in partnership with Al Amoudi such as Gold and other precious metals.

    Most of all Woyane is also using ECX to legitimize and bring into world markets the money looted from Ethiopian treasury. Therefore, Eleni is nothing but a Woyane Economic Cadre – who is fast becoming an instrument of Woyane looting of Ethiopia.

  8. Guest
    | #8

    I believe every move in the economic sector, political sector, and through issuing repressive legislation are intent on satisfying the ruling powers lust for controlling the life and destiny of the Ethiopian people. These paranoid control-freak people are trying to muddle in every aspect of the Ethiopian people life. They are reducing the populace in to a collection of controlled and dehumanised zombies. The dictators know their outrageous ambition and live with fear and insecurity. They are dreaming to control all the wealth and the economic resource in the country so that one day they could sell us as a commodity when they feel things are going wrong. The inaction and passiveness, and lack of unity among the Ethiopian people have given them all the time, the power, and the nerve to sit, conspire and do whatever they deem necessary for their domination in the country. Let’s imagine ourselves as individuals in Ethiopia detested by Woyane; we will soon realize that we do not have the slightest form of freedom and rights that we minimally need as a human being.

  9. alazar
    | #9

    tigrain getting richer and ethiopian getting poorer. they been doing that for a long time.
    The looser between ethiopian-eritrea coopeartion is the tigrain people. Isayas of eritrea believe united sudan & united ethiopia, not ethnic based politics like weyane TPLF. you only have to lister the interview in gave to Elias of ethiopian review. make your judgement. weyane fear is that ethiopian will work with eritrean government. that is weyane worest fear. Medrek party is a wayne extension, the core economic & military power is tplf, tigrain 1st citzen and other second. yeap. seya, and gebru asert is another coin of TPLF. They(seya&Gebru) are more loyal to tigrain people than ethiopia. real ethiopian oppostion are G7,OLF,ONLF,EPPF & TPDM. other in addis are power hungery of seat.

  10. alazar
    | #10

    wake up ethiopians. our nation falling apart.
    Ethiopia has been under sieged by weyane TPLF for the last 18 years. if we ethiopian don’t wake up. it will contune and our people will suffer.
    The looser between ethiopian-eritrea coopeartion is the tigrain people. Isayas of eritrea believe united sudan & united ethiopia, not ethnic based politics like weyane TPLF. you only have to listen to the interview he gave to Elias of ethiopian review.

    make your judgement.

    weyane fear is that ethiopian will work with eritrean government. that is weyane worest fear.
    Medrek party is a wayne extension, the core economic & military power is tplf, tigrain 1st citzen and other second. yeap. seya, and gebru asert is another coin of TPLF. They(seya&Gebru) are more loyal to tigrain people than ethiopia. real ethiopian oppostion are G7,OLF,ONLF,EPPF & TPDM. other in addis are power hungery

  11. አንበሴ
    | #11

    ዶ/ር ሰኢድ! ስለ Ethiopian commodity exchnage ጥናትዎ ሲያቀርቡ የአምባገነንኑና ጨካኙ የፋሽስት ወያኔ ቡድን አንብበው ይለወጣሉ ለህዝብ ያስባሉ ብለው ያስባሉን ጥናትዎን ሲያቀርቡ? ወይስ ቅድሚያ የሚሰጠውን ጉዳይ “ሃገርን ለማዳን” የሚደረገውን ርብርብ ዘንግተውት ነው? ኢትዮጵያ ሃገራችን በማንኛውም የኢኮኖሚ የማህበራዊና የወታደራዊ ተቋም ሁሉ በፋሽስቶቹ ወያኔዎች ቁጥጥር ስር ሆኖ ህዝባችንን ለስቃይ ለሞትና ለስደት እያደረገ ባለበት ወቅት ቅድሚያ የምንሰጠው ጉዳይ ” ሃገርን ለማዳን ወያኔዎችን በማንኛውም የትግል ስልት ታግለን ኢትዮጵያን ማዳን” ወደሚለው ብናተኩር እንጂ:: እንደዚህ አይነት ጥናታዊ ጽሁፎች ወያኔዎችን የሚያንበረክክና ከስህተታቸው ተምረው እንደሰለጠነው አለም የሚስተካክከሉ ያስመስላልና ይታሰብበት:: ወያኔዎች የጫካ ዱርዬ ኮምኒስቶች መሆናቸውና ካልገደሉ የማያምኑ አውሬዎች ናቸውና ይታሰብበት::
    ድል ለኢትዮጵያ ህዝብ!!!

  12. Getachew-Minneapolis
    | #12

    “Ask not what your country can do for you–ask what you can do for your country.”
    John F. Kennedy.

    I am very proud of Eleni Gebre-Madhin effort to bring some change in Ethiopia. This is what the country needs today. Most of us who are educated in the west we don’t think in a positive change instead we are pointing our finger to criticize the government by all means. However, Eleni is a model for all of us to think “we can make a difference if we try” Our county needs all of us to bring the country out of poverty in every area. Economist Eleni Gabre-Madhin has ambitious vision — to found the first commodities market in Ethiopia, bringing rates and standards (not to mention trading systems, warehousing and data centers) to the trade of crops. Her effort is working to build Ethiopia’s first commodities market. Re-establishing the profit motive for farmers, she believes, could help turn the world’s largest recipient of food aid into a regional food basket. Food aid does not work at all, and what we need is a free market economy. Ethiopia has been one of the major recipients of international aid in recent times. According to OECD-DAC statistics, net ODA to Ethiopia amounted to US$1.94 billion in 2006, making it the 7th largest recipient among 169 aid receiving developing countries. All this aid money that flows to the country does not really help the poor. What Ethiopia needs is a free market economy the one that is started by Eleni, and we have to follow on her foot to bring positive change if we really care about Ethiopia. Thank you Eleni-I am a proud supporter of your idea. Free market is working for the west and will work for Ethiopia and Africa.
    Thank you

  13. Ayalew
    | #13

    ምነው ጃል የተፅፈውን አንብቦ ያልተረዳ አፉን ይሰበስባል አፉን የሚከፍት ግን የወያኔ ካድሬ ነው::ካድሬ ደግሞ እንዳያስብ ህሊናውም ጭንቅላቱም ተዘግቷል; ሥራው እንደሰለጠነ ወሻ መናከስና ያዙኝ ልቀቁኝ ነው::

  14. Guest
    | #14

    Getachew,

    You deliberately missed the point: No one has problem with exchange market, for that matter with democracy, or the rights of nations and nationalities, that is not the point. You are either ጅል or አጭበርባሪ

  15. adam
    | #15

    she got the job because she is tigrain. just like a white man get a job beacuse he is white in america. she is not special.
    bunabuaua,alex,perplexed, Asfaw, xzxzxzx,peace,Picaso, you all tigrain working for weyane under cover. we ethiopian know u. promise we will come after you.

    # 1 problems of ethiopian are those tigrain looting, raping, and selling our country ethiopia. we have to fight them any means necessary. I know u tigrain. but that is beside the point. all civil society in ethiopia must up rise fight those tigrain inveders hand by handy. as you know ethiopia has been under sieged by weyane TPLF for the last 18 years. if we ethiopian don’t wake up. it will contune and our people will suffer. The looser between ethiopian-eritrea coopeartion is the tigrain people. Isayas of eritrea believe united sudan & united ethiopia, not ethnic based politics like weyane TPLF. support our sruggle for freedom. http://www.eppfonline.org/. support them in any way. It is your duty as ethiopian to free yourself from those tigrain rats. you only have to listen to the interview. Isaya gave to Elias of ethiopian review.

    make your judgement.

    weyane fear is that ethiopian will work with eritrean government. that is weyane worest fear.
    Medrek party is a wayne extension, the core economic & military power is tplf, tigrain 1st citzen and other second.
    yeap. seya, and gebru asert is another coin of TPLF. They(seya&Gebru) are more loyal to tigrain people than ethiopia. real ethiopian oppostion are G7,OLF,ONLF,EPPF & TPDM. other in addis are power hungery

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