PM Meles Zenawi’s responses to Ethiopia’s economic malaise are getting funnier By Genet Mersha

February 4th, 2011 Print Print Email Email

At a time when neighboring countries are tottering down the path of popular revolt to overthrow entrenched dictators and possibly collapse of their regimes, Meles has tightened political repressions in Ethiopia (more…)

At a time when neighboring countries are tottering down the path of popular revolt to overthrow entrenched dictators and possibly collapse of their regimes, Meles has tightened political repressions in Ethiopia to protect himself from their fate. In spite of those attempts, however, the deepening economic problems are poking citizens with tensions and tremors of their own. These are now being felt throughout the country, as public complaints even in the government-controlled media are showing.

Moreover, not that these would amount to anything in a highly militarized and ethnically divided society, rumors and some credible stories are circulating about open clashes between farmers and students with security forces in some parts of the country. As signs of the economic alienation of millions, petty crimes in towns and cities, burglaries and highway robberies are becoming common occurrences some distances from the capital city itself.

The making of the current frustrations in Ethiopian society have been brewing over a long time. Their origins lay in the political crises that remain unresolved, nor the regime would admit. Then there are the ubiquitous economic crises that have been afflicting over 90 percent of the population. The only solution the government favours now is complete shut off of public space, as a primary step, politics by force and economics by decree, which have now become the mode of Ethiopia’s governance. Therefore, such a situation has served better corrupt party officials, businesspersons, the security, the military and those wired with the leaders. In such an environment, ordinary citizens find it difficult to eke out normal existence.

Whether information from countries now affected by popular revolt is permitted, the situation in those countries may only encourage a sense of solidarity with others. The little information Meles’s security apparatus could not control has made it through to Ethiopians. Therefore, they have become true partners in sharing the pains of the Egyptians, Tunisians, the Sudanese and Yemenis… As they say in Ethiopia, a heart filled with its own pains has better feel for others.

What is happening in Egypt, the reporting of which has been forbidden in the mass media in Ethiopia in this age of the Internet, mobile phone, in addition to foreign broadcasts may have only evoked great interest to the degree it has terrified the Meles regime. This is because people understand that is the reason why he chose to ‘shelter’ the people. This ‘let me get bye this’ situation attitude has not only brought contempt for the regime, but also given them a good sense of its shakiness. In the meantime, the situation in the country would continue to worsen, not because of outside influences, but mainly on account of the weight of the problems our people have been shouldering on a day-to-day basis.

Soaring prices & inordinate solutions at work

At present, notwithstanding the under-reported level of inflation and the pain this has caused for ordinary people for so long, especially after the introduction of devaluation and price controls recently, have deeply worried the government. It is trying to do everything within its powers, although even the solutions they try are becoming more grievous than the pain of living on little or nothing. An expert from the Ethiopian Commercial Bank recently rightly observed, “The most recent devaluation tended to function opposite to expectations and even caused grotesque developments in the economy. The subsequent high and indiscriminate price rise of all goods encourages imports more than exports, as domestic prices have become more rewarding than export prices” (Addis Fortune, Commentary, 30 January 2011).

The economist Prime Minister Meles Zenawi seems now to be fully aware of the damages he has caused the nation’s economy and the lives of its citizens. A man of hubris, he cannot say he lacks the humility to say sorry for that. However, when he appeared before parliament on 3 February, he used his usual infinite wisdom and ability to foresee over a long span of time, and pledged, among others, not to make any further devaluations for another five years. There is nothing more disappointing than this silly trick of dictators to summon evil at will and sputter ally when things go wrong at their lack of ability to dismiss it at will. Therefore, they jabber false promises and hopes; they know it is their way of admitting mistakes.

Of course, Ato Meles Zenawi’s ability to foresee things has been tested on several occasions. Recall that when he invaded Somalia he said he would make it a cakewalk into weeks. Ethiopia was stuck there for over two years—for that matter making a very amenable situation in that country more catastrophic for everyone now. If all claims to view things on a long-term basis, such as Ato Meles Zenawi’s five-year horizon are indeed possible, especially in economics either he or the IMF must have been able to foresee the December 2010 inflation level at 14.5 percent coming.

That not being the case, only in mid-November the IMF Executive Board gave clean bill of health and Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair of the Board, on 15 November stated:

The Federal Democratic Republic of Ethiopia has successfully implemented policies to reduce inflation and rebuild external reserves under the Exogenous Shocks Facility supported program. Program performance has been satisfactory with all of the quantitative performance targets met with margins and structural benchmarks implemented. Inflation has continued to decline, reflecting monetary restraint and aided by favorable weather conditions. International reserves have risen to about 2.1 months of imports coverage. The mild impact of the global recession on the Ethiopian economy has allowed for better performance on the external targets.

Press Release No. 10/432 November 15, 2010

That is not the end of it. Do you need more reminders? Who would forget that broadband Internet coverage of the breadth and width of Ethiopia within five years fiasco? Yes, important efforts were made and Cisco amassed tens of billions of dollars building the and the linkages. Thanks to the Chinese, the latter one has now become a dedicated instrument of espionage on citizens and mind control, instead of national development.

I have good reminder, much like a ticker the time when Meles Zenawi made that pledge to make Ethiopia the first country with broadband access within five short years. At the time, he was busy paving the ground early on for his election in 2005 that he took for granted. Ethiopians showed him that they are not with him, his abrasiveness and his mishandling of the nation’s affairs like his ‘kitchendom’. I recall that pledge distinctly. My grandson was born at that time. Soon he would turn ten. Surprise! Surprise! The latest research by an Irish company about Ethiopia’s snail-paced move into the world of technology states it all:
The population is approaching 90 million, but there are less than 1 million fixed lines in service, and a little more than 3.3 million mobile subscribers. The number of Internet users is dismal below 500,000 at the end of 2009. Communications service provision is reserved for the Ethiopian Telecommunications Corporation (ETC), one of the few monopoly providers left on the African continent.

What is the conclusion? The report acknowledges that the French have taken over the Ethiopian Telecommunications to turn things around. Therefore, even in its most optimistic conclusion it hopes that the telecommunications sector may witness some movement. Of course the report is initiated and is set to see what it wants to see and therefore its hang-on is pure liberalization. For Ethiopians, however, what matters are their real national development and a sense of freedom from Meles’ Orwellian world. For whatever its worth, the report skeptically states:

By 2014 the number of fixed line subscribers in Ethiopia is expected to increase to 4.4 million, representing an annual average growth rate of 38% p.a. The number of mobile subscribers is expected to grow at 43% per year over the period, reaching almost 20 million by 2014. Even at these high growth levels the overall teledensity will be less than 25% in 2014, indicating that the market will be nowhere near saturation. The number of Internet users will jump to 12 million, but Internet subscribers will still be low at 1.4 million at the end of 2014. Ethiopia presents an opportunity for investors to reap vast returns as the liberalization agenda gets underway., ICT Investment Opportunities in Ethiopia – 2010″ report

Good news folks! GTP would cost you only one trillion ETB

The other headline grabbing news is that the prime minister has kindly identified funding sources for his Growth Transformation Plan (GTP), not that he was willing to tell openly every piece of it. The total amount required is one trillion ETB, about $60 billion, part of which is to be met from income from power export to neighboring countries, more rental of farmlands, significant amount of foreign aid and the rest from borrowing and foreign loans. What a great picture for the future of deepening economic structural changes in the country!

Ethiopia’s economic problems arise from: (i) centralization of decision-making in one person, whose officials only frightfully echo every single word the prime minister utters. Listen carefully when the foreign minister, the finance minister, minister of agriculture, minister of trade, communication minister…speaks. The echo is deafening. If this is the way a nation should be governed, what else should one expect other than bad economy and terrible human conditions? (ii) The other problem is the continuing replacement of few left over expertise by new party cadres to make the political decision the boss would appreciate. The first problem is that these people learn nothing, since they spend their days in political plotting; (iii) bad policies and poor implementation are a major problem, which we have seen time and again; (iv) poor domestic production and supply capacities remain a fundamental problem; (v) corruption and lack of accountability have become a way of life for the ruling party top down; (vi) the country has comfortably become dependent on foreign aid that has stolen its sense of independence and self-reliance. Even that, after the 2010 election and the misuse of humanitarian aid for political purposes, the international humanitarian community is having a second thought.

These are the major bottlenecks to the Ethiopian economy. Each of these has contributed to the continuing domination in the economy of poor production systems and non-existent and, if any, unreliable supply capacities.

Consequently, a structure of permanent disability has failed to meet domestic demands for goods and export capacity to foreign markets. These translate into foreign exchange shortage and poor macroeconomic environment that has continuously distracted policy from improving production and real national development.

On a side remark, let me ask you if you could give me one example where Ethiopia’s exports have found a niche market for any of its unique and much appreciated produces in terms of quality. Trust me, you would not find one, save, the stealth EFFORT, the TPLF’s business empire, which has penetrated the Chinese market—where now Ato Seyoum Mesfin, former foreign minister and deputy chairman of the TPLF, would operate as the eyes and ears of the regime as ambassador to that country. Many of the children of the ruling party members (TPLF) are also being educated in China.

The policy problem of this regime is that it lacks macroeconomic policy consistency. Because of that the task of policy has been reduced to fire fighting permanently against inflation and the chronic shortages of goods and services. Obviously, consistent long-term development has been pushed to the second tier or to chance. If there are some lights flickering here and there, they are not an outcome of two decades of work—but the efforts of a few enterprises and the nascent private sector—outside the ethnic oligarchic enterprises of the ruling party. That is why in Ethiopia today everything is touch and go. The only exception to this is the political attempt at putting the hyper makeover of Addis Ababa as Meles’s fact on the ground to delude citizens and willing accomplices to project that as national development.

The crises of the moment & Meles’ solutions

What gave spike to this present worry of the regime is the alliance of two evils: devaluation and inflation. This is further made worse by price controls that have been tried in many countries and have completely failed. It may some how for a while impose controls over hoarders and price gougers. However, overall it would only worsen the economic situation and weaken the economy. The problem in Ethiopia has always been Meles’ over-confidence that no one could challenge him in his police state. He can do anything he likes with the economy, the country’ security, its long-term interests, the prospects of future generations…

Even the pro-Meles EPRDF-ite Addis Fortune on 23 January tolerated the publication on its magazine strong criticism of Meles’s policies. The commentator wrote, “Little by little, certain goods and services in the market for which people are willing to pay are disappearing. It will not be long before parallel markets are created to cater to those who are willing to pay for what they want. Alternatively, traders may find a way of circumventing the system. Signs indicating this are also creeping.”

Interestingly, at about the same time in November 2010, China was also considering price controls to dampen food inflation, according to the Financial Times (China eyes price controls to fight inflation, 16 November 2010). Since Beijing knew the negative consequences to the economy, a coupe of cities used it to some products. China resorted to raising interest rate and is still mulling in search of better ways of dealing with rising prices sourced in inflation, other than price control.
In Ethiopia, salary increases have been made recently to offer civil servants some minimal cushion. They range from 28 to 38 percent to 1,017,351 civil servants (206,334 federal and 1,017,351 civil servants—source Capital). These adjustments range from 1,000 ETB ($ 60) to high-level officials to ETB 144 ($ 9) to lower level workers.

Given the speed with which the price level changes, not to speak of the availability of goods, the amount of the adjustments has understandably courted more disappointments, according to Capital of 31 January. Since the increases are too little to make a difference in this environment of rising prices, it is reported that civil servants are openly critical. In the circumstances, more noticeable is the big hole in the national budget equivalent to five billion ETB in unbudgeted expenditures, to which the increase itself jacks up its own share to the grinding inflation.

Speaking of inflation, from theory point of view, some in leadership seem literate in economics. Unfortunately, the translation into practice of that literacy has repeatedly belied that assumption and their pretenses. Of course, policy in Ethiopia is hardly a reflection of national consensus, but diktat from Meles, previously from Mengistu, which has gotten the country nowhere. In the past two decades, Ethiopia has experienced several bouts of inflation, a phenomenon directly associated with natural catastrophes, such as cyclical droughts, resulting in GDP decline and shortages food and other goods. The country’s experience is that in a while they only turn into either disinflation or deflation during crop seasons.

Now economic activity has increased and the level of imported inflation is going up on annual basis, especially this time. The nature of recovery in global economy is also making it a bit tricky. The policy that is the Meles regime has begun to pursue is not only reminiscent of Britain in the course of WWII, but has also been hardly capable of addressing the old and the changed circumstances with appropriate policies. It is not enough to perorate about this or that economic thought or this or that country’s experiences. Policy-makers must see the pressing need to learn to apply the right policy measures differently—this time around through genuine national consultations, instead of the usual Stalinist top down approach.

Bear in mind, in the 1980s Argentina, Brazil and Israel learned to control their huge inflations through approaches that were totally unorthodox—different from what were applied in mainstream Western economic settings at the time. It is in recognizing that the great economist the late Rudiger Dornbusch offered his view of that with two short sentences as admonition: “The economists’ scissors normally has two blades, supply and demand. But in questions of stabilization policy, that often is not the case.” The Ethiopian situation is far different from that of those countries, but stabilization follows similar principles, since the need for future growth has to be kept in mind.

Nevertheless, the message here is that the stakes are now too high and recurrence of these problems has become habitual and different solution must be sought. Consequently, Ato Meles must seize the opportunity to open the door for open and transparent discussions, not only between the usual suspects. But also this time in a nation-wide genuine participation, whereby the people that bear the brunt of sufferings should express their problems and make their recommendations, without fear of reprisals.

The prime minister holds scheduled meetings with businesses and is useful and essential. However, even that seen by its record, at no time has it been about addressing their actual problems of the gatherers. Therefore, as a part of his government’s approach in the search for solutions, this time he must allow people to express themselves. For once, he should stop pushing his solutions down everybody’s throats. Discussion is not a skills talent to pick who knows most and better, but to exchange views. This time, Ato Meles must listen to what citizens could chip in the solutions they think would save the nation. He should also recognize that, in addition to a number of policy-related destabilizing factors, the world grains market and food production in general has now come back with vehement problems of is own.

Food shortages and rising prices & the Meles regime response

Citing its barometer index, according to Reuters, on 3 February the FAO reported “price changes for a variety of staples, averaged 231 points in January — the highest since records began in 1990…From its vantage point, Oxfam attributed the problem to reduced production due to bad weather, increased oil prices making fertilizer and transport more expensive, increased demand for biofuels, export restrictions and financial speculation.” That much for international analysts; no one sees the impact of poor and misguided policies on peoples in different countries.

The Economic Times of India recently wrote, “In what could give a big boost to India’s efforts at food security, Ethiopia has offered 1.8 million hectares of its farmland to Indian investors that equals nearly 40 percent of the total area of the principal grain-growing state of Punjab.” The article was published in connection with the visit of the controversially demagogic Minister of Agriculture Tefera Derbew. The paper quotes the minister, who informs it: So far we have transferred 307,000 hectares of land to foreign and domestic investors. Some 79 percent of this land has been transferred to Indian companies. This land is made available on a 70-year lease. We are now proposing to transfer another 3.6 million hectares of land to investors from overseas. And I am confident that more than half of the 3.6 million hectares land will go to Indians. How much land will actually go to Indian investors depends entirely on the interest of investors. If they come and take all the land, then also we will be very happy. Indian investors are very welcome in Ethiopia.

The Economic Times observes that land offered to Indians so far equals nearly 50 percent of the cultivable land of Punjab, often called India’s granary. According to the paper, it accounts for 23 percent of its wheat and 10 percent of paddy output.

It seems that the Meles regime is taking its revenge for its agricultural policy failure by selling the country piece by piece. This has built frustrations of peasant farmers and patriotic Ethiopians to rise. It knows that they do not want to see their country sold piece by piece, for that matter to the lowest bidder! What is worrisome is that the contracts are long-term, the shortest being sixty years and the highest 99 years. Most of the deals the government has made so far with farm-renters are encouraged to produce cash crops so that it could pocket some foreign exchange, if not immediately, at least, after several years.

What has so far been kept secret has now become official. Land renters are promised and included in their contracts that they can export their produces to their home countries or wherever. Therefore the domestic market has nothing to look forward for from these deals. What state of mind tolerates this, now resulting in the displacement of our farmers and the destruction of natural forests, about which even the figurehead president has expressed repeated concerns?

The May 5, 2010 issue of The Reporter carried a story that the residents of Gambella had written to President Girma Wolde-Giorgis, asking his intervention to stop the takeover of their lands and the clearing of forests by farm companies. Incidentally, the land clearing company is state-owned and is paid Birr 9,000 ($670) per hectare (Addis Fortune, August 29).

Their letter states in part, “In a manner we do not know, without anybody telling us and consulting with us, our lands and forest resources have been allocated to a foreign company…The forest is our life, we use it to harvest honey, prepare our traditional medicines and build our homes…” The affected people also indicate that they do not want “the forests they have preserved this long to be destroyed in the name of development” [writer’s translation from Amharic].

What is interesting about this particular complaint is the fact that there is clear division between the people and the state administration. The local kebele (neighbourhood association) leaders are on the same side with the people, soliciting the president’s intervention. They have even been delegated to represent the people on this matter. On the other side are the local administration, the court and the federal ministry of agriculture; the latter saying studies have confirmed that there would be no adverse effects resulting from expansion of commercial farms on the leased farms and the clearing of natural forests. As protest and complaints are often interpreted in political terms in Ethiopia, The Reporter reports that the local administration was incensed and reflected the view that this was the work of anti-development and anti- democratic elements hiding within the people that are creating confusion.

Fortunately, the story does not end there. The president responded by writing a letter to the local environment protection agency requesting it to take urgent measures, taking into account the complaints by the residents of Goumare & kabo districts, in Gambella region. The local environment protection office wrote a letter to the minister of agriculture that the measures taken to give the land to commercial farmers were wrong. The minister of agriculture has not responded to the state president, because of which the president pursued the matter further recently writing his second letter to the minister of agriculture reminding him of the problem and inquiring if action was taken. The minister is a political cadre propelled to power not because of his capacity, but because of his service to the party as a political cadre.

This should serve as sufficient evidence that transactions in land are taking place in ill-equipped countries such as Ethiopia that lack capacities to assess the implications of ‘land grabs.’ This time, the state has sided the foreign farm companies. Clearly, Ethiopia does not even have adequate capacity, let alone to monitor its long-term consequences to millions of its citizens and the country’s future itself, but also even how much land is rented out at this stage.

The source of the problem is that the fact that every region is its own master and can give land to whomever it wants, theoretically so long as it did not exceed 5,000 hectares. The country does not also have centralized data collecting system. Nor has it put in place appropriate laws and regulations to ensure follow up their implementations. Moreover, the task of land certification in Ethiopia has not been finalized. To date, only four regional states—Amhara, Oromia, Southern Nations, Nationalities and Peoples (SNNP) and Tigrai—have almost finalised issuance of land holding certificates to peasant households, formally recognising the rights of holders of the certificate.

At the same time, the other five regional states—Afar, Somali, Benishangul‐Gumuz, Gambella and Harari—have not issued legislation how to ensure and protect the rights of farmers and pastoralists, or implement land-leasing arrangements. It is mostly in these regions that there has been serious disenfranchisement of the farming population. A very useful paper presented to the World Bank Conference on Land Policy and Administration in Washington DC from April 26‐27, 2010, Imeru Tamrat states, “In the absence of detailed land administration laws in the other five regional states, it is not clear how the landholding rights given to peasants and pastoralists under the Constitution is being implemented within these regional states” (Imeru Tamrat, Governance of Large-scale Agricultural Investments in Africa: the Case of Ethiopia, 2010).

The fact that this new enterprise has made African governments’ role as both middlemen negotiating land deals and the ones clearing the lands and pushing their people from their holdings no different from that of native slave traders who hunted their own people and handed them to Arab slave traders that in turn passed them for higher fees to European slave traders. It may sound too strong a judgement. Anyone that has problem with this need only go and talk to those uprooted from their ancestral lands and their belongings.

Finally, what should farm-renters produce? As far as Ethiopia, speaking through its State Minister for Agriculture Abera Deressa, is concerned, they should produce cash crops. On 26 October, in an interview with Bloomberg he announced “We want to increase the amount of land to be leased…We have abundant land available.” He urged those already invested and potential investors to focus on production of “high value” crops; in that situation Ethiopia could afford to import its foods using those earnings. Ato Abera Deressa was confident when he said, “Then we can solve the food problem.” Such is the state of affairs in the Federal Democratic Republic of Ethiopia under the TPLF led EPRDF government.

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