International Perspective of the Growth & Transformation Plan of Ethiopia

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Prime Minister Meles Zenawi Ken Ohashi, country director for the World Bank for Ethiopia and Sudan Gu Xiaojie, ambassador of the Peoples’ Republic of China Thomas Staal, mission director USAID. Antonio Sanchez-Benedito Gaspar, ambassador for Spain.

The Growth and Transformation Plan (GTP), after being presented to various  sections of the public during the last two months, was finally  presented to international development partners for two days of  discussions, beginning Wednesday, September 29, 2010. Prime Minister Meles Zenawi and high government officials had  been holding back-to-back meetings with the public all over  the country, especially during the heyday of the announcement,  presenting the logic behind the five-year plan, which sets  ambitious goals across sectors, and fielding questions. Almost two months after Sufian Ahmed, minister of Finance and  Economic Development (MoFED), announced the plan on  August 5, 2010, international development partners  finally  got the chance to review and comment on it. “We specifically scheduled the meeting with international  development partners at the end because we wanted to present  it to the public first,” Sufian said during the announcement. This was contrary to previous development plans of the country,  where donors were consulted ahead of time and the public was  almost never consulted, at least not on the scale seen in the last  two months. The Amharic version of the draft of the widely circulated GTP was  translated into English and made available to development  partners on Wednesday, with Mekonnen Manyazewal, state  minister of MoFED presenting it. The next day, Meles attended  the meeting, where he also fielded questions from international  development partners, including ambassadors and representatives  of donor agencies. The plan was ambitious but achievable, Meles admitted, as  with every meeting held with stakeholders on the GTP from the  very beginning. International development partners showed their  support for the plan and forwarded their questions to the Prime Minister. Although the plan, which maps out the macroeconomic future of the  country, envisages growth in agriculture and industrial sectors  as well as in infrastructural development, it does not include plans  for capital markets, such as a stock exchange, or the country’s  accession to the World Trade Organisation (WTO). The lack of the mention of stock markets was pointed by Antonio  Sanchez-Benedito Gaspar, ambassador for Spain, who asked Meles  if there were any plans for one. At the current stage, there is no need for a stock market in the country,  Meles, often weary of the topic, maintained. “Although the government is not against a stock exchange system in  the country, its primary focus is on developing the banking  system,” Meles responded. “Developing the commodity exchange of  agricultural products in rural areas is another area of focus.” The National Bank of Ethiopia (NBE) recently made a move to replace  its manual clearing and payment systems with an electronic clearing system,  due to come online in June 2011. It also ordered commercial banks to  implement centralised, online, real-time, electronic (CORE) banking systems  to enable them to do business with it after its upgrade. This was seen by some industry observers as a step in the direction  of allowing capital markets. If banks are interconnected, not only does it facilitate transactions and  strengthen their customer base, it also allows for a mechanism to  determine share values, they believe. The strengthening of banks and the consequent adaption of technologies  that support them will make them more competitive, even if foreign  banks are to enter the market. The need to liberalise banking is one of the major criticisms levelled  at Ethiopia in its bid to join the WTO. “The role of accession to the WTO is missing in the plan,” remarked  Thomas Staal, mission director of the United States Agency for  International Development (USAID), during the meeting. However, since the country is already in the process, it was not  highlighted in the plan, Meles replied, without denying the importance  of accession to the WTO. Ethiopia applied for membership in the trade organisation back  in 2003 and is currently undergoing negotiations. What is highlighted in the plan, however, is the doubling of agricultural  output, the doubling of the economy, and massive infrastructure  development in the next five years. The enormity of the goals set by the plan has drawn the concern and  critiques of the public at large, as to the viability of their accomplishment  within the allotted time. This surfaced during its meetings with the Prime  Minister. However, despite the ambitious nature of plan, it is doable, Meles  reiterated in the meeting with international development partners,  just as he had previously done with the public, citing a similar  scenario in the previous five-year plan. The previous Plan for Accelerated and Sustainable Development to  End Poverty (PASDEP), also had some ambitious goals but was  accomplished remarkably well, the English copy of the GTP states. China is ready to share its experience with Ethiopia, said Gu Xiaojie,  ambassador of the Peoples’ Republic of China, recognising the  achievements of the PASDEP. The Chinese government has already agreed to work extensively  for the transformation of the technology used in manufacturing  and infrastructure in Ethiopia, Meles revealed, publicly welcoming  the support of China. Whether in the previous plan or in the new GTP, few have denied  the overall pace of economic development, thus far. In fact, the pace of the country in economic development is as fast  as its athletes on the track, commented Ken Ohashi, country  director for the World Bank in Ethiopia and Sudan, drawing smiles  and laughter from the audience. However, Ohashi also commented  on the transaction costs that are being incurred due to inefficiencies,  impairing trade and making the comparative advantages that the  country has to offer pointless, he said. There is a need to decrease the transaction costs, Meles admitted,  but the agricultural products of Ethiopia have not lost their advantages  and are being sold in international markets, he defended. The actions that are being taken by the government to address the  problem include improving rural and urban roads and creating  easier access to international markets for farmers through the devaluation  of the Birr, according to Meles. He also cited the improvement of  network infrastructure and privatisation as a means of achieving efficiency. Meles pointed out France Telecom’s takeover of the  management of the Ethiopian Telecommunications Corporation (ETC),  which the government is in the final stages of negotiating, as an example  of that effort. One of the things that the company is expected to do is to build capacity  in the sector, after which they will return its management to locals.  If this is found to be successful, the same approach will be implemented  in the power sector, according to Meles. Another member of the World Bank, Espen Villanger, senior economist  at the Ethiopian office of the World Bank, raised the issue of the  role of women and job opportunities. “My concern is that Ethiopian women are at a disadvantage, especially  in the economic sector,” he said. He backed up his argument by citing the National Labour Force  Survey that was done by the Central Statistical Agency (CSA) in 2005.  The unemployment rate for women in urban areas was three times  more than men, and there was a 50pc wage gap between them for  the same work with similar educational backgrounds, it stated, which  was much higher than most countries. “What is worrying about the situation is that there are many young  people coming out of higher education institutions with few job  opportunities to accommodate them,” he said. If Ethiopia achieves equality in terms of wages and education, its economy  would grow faster by more than two per cent, a World Bank team of experts  found, he said. “Although it is true that we need to do more on this issue, the figures  mentioned are a very good incentive to enhance the role of women in  the economic spectrum,” Meles responded. The World Bank recognises the government’s work so far, but it needs  to exert additional effort, Espen told Fortune. He emphasised the necessity of focusing on micro and small enterprises  (MSE), the road the Ethiopian government has taken. This is the key  solution to alleviating the problem, as there is no way that the growth  of formal jobs will satisfy the demand side, and the World Bank will  support this move of the government, he said. The government also plans to increase the savings habits of the country,  which it considers very minimal when calculated as a percentage of its  gross domestic product (GDP). The plan is to increase domestic savings to 15pc of the GDP by the end  of 2015, which, in effect, will support the huge demand for the country’s  investment, the Prime Minister said. To this end, the government has plans to introduce new savings instruments  like social and health insurance schemes and savings bonds that target  locals at home and the Diaspora abroad. Also, as one of the pillar strategies, capacity building in the next five years  will focus on the justice system, especially at the prosecution, police, and  prison levels, Meles said at the meeting. The PM finally promised to consult and engage development partners  at the implementation stages of the GTP. “The GTP is achievable, I think, but everyone in the government, donor  agencies, and the private sector have to contribute as much as they  can,” the senior economist at the World Bank, told Fortune.