chairman of the Commercial Bank of Ethiopia and advisor to the Prime Minister
Mrs. Helga Zepp-LaRouche, representatives of governments and different institutions,
Dear Friends, Ladies and Gentlemen,
It is an honor and a pleasure to be here in Berlin. First of all I would like to thank the Schiller Institute for inviting me to speak on a broad topical subject, the importance of the economic development of Ethiopia in the context of the New Silk Road, the Maritime Silk Road and the greater African region.
The term “Silk Road” refers to an ancient trade route, but my interest obviously lies in highlighting the significance of its present incarnation within the current global context. By all accounts, the old Silk Road played a vital role as a well-traversed trade route that stretched outwards from China to the Middle East, even to the shores of the Horn of Africa. This, I believe, was borne out by the history of the old Silk Road, which connected China with much of the rest of the known world.
Like its predecessor, the New Silk Road will radiate from China and straddle a vast swathe of the globe, opening up opportunities for an unprecedented level of trans-boundary exchange of goods and services. I strongly believe that the New Silk Road will not only boost the trade volume of emerging countries, but will also broaden their economic interaction.
However, in the context of changing variables of globalization, countries—especially like ours from the developing world— need to sharpen their competitive edge to fully benefit from the kind of interconnectivity that the New Silk Road brings.
It bears keeping in mind that sharpening one’s trade competitiveness is tied to building a strong economy, which again relies on the ability of these countries to design and implement correct home-grown policies and strategies—as the crucial ingredient of development cannot simply be imported or dictated from abroad.
It is evident that the problem with most countries on our continent is not the lack of resources per se. The biggest challenge lies in weak capacity to design and sustainably implement such policies and strategies, without which no emerging country can effectively utilize the opportunities global connectivity offers, mitigate the adverse effects, and tap into the promising benefits of the modern Silk Road.
Hence, lest our continent miss out on the current wave of late development, the present generation of African policymakers needs to bury the legacy of dependency on foreign aid, even though external assistance, when properly sequenced and allocated, has been useful. Instead, African leaders would—if they properly mobilize domestic resources and thrive to catch up with mid-income, industrialized economies—play a commensurate role in the global economy.
Dear Friends, after having said this much, taking Africa in general as an entry point, I shall now return to my own country, about which I know a thing or two.
I trust that some of you are aware that Ethiopia was once home to a glorious ancient civilization, survived by at least two enduring and interdependent state and religious institutions. The records of the ancient past attest to Ethiopia’s long and fascinating history of interaction with the great Mediterranean, Indian, and possibly Chinese civilizations.
However, in the last few hundred years in general and the last half of the 20th Century in particular, Ethiopia entered into a prolonged period of stagnation, followed by a steep decline that continued right up to the dawn of the modern era. The failure of successive regimes to accommodate diversity, and their inability to meet the aspirations of the peoples of Ethiopia, significantly contributed to its downward spiral.
Although, throughout these centuries, Ethiopia managed to retain and defend its independence from foreign aggression, yet the country missed out on the great global transformation. As the rest of Ethiopia’s historical peer states underwent significant changes, our country remained mired in stagnation characterized by recurrent drought, famine, and internal strife.
The cumulative effects of centuries of social and economic stagnation sadly worsened to the point of state failure during the long seventeen years of military rule that ravaged the country from year 1974 to 1991. The command economic system pursued by the military junta, combined with its repressive policy against nationalist demands for political autonomy, left the country in shambles.
Hence, after the fall of the military state in 1991, the successor coalition government of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) saw peace and reconciliation as its first order of business.
With a sense of urgency, the leadership exerted enormous effort and succeeded in stabilizing the polarized political landscape of post-conflict Ethiopia by a radical institutional design of governance. The upshot, I am proud to say, is the present inclusive constitutional federal system that provides for all basic individual and group democratic rights.
Once lasting peace had been secured, the leadership turned its attention to the equally pressing task of dismantling the inherited command economy and the institutional barriers it had created. This prompt measure released the market from counterproductive state interference and even spurred a modest GDP growth of around 5% for the first twelve years. But, to the postmilitary regime Ethiopian leadership, led by the late Prime Minister Meles Zenawi, even a higher percentage of single-digit growth was inadequate to turn around this country with an alarming index of population growth.
Against Neoliberal Prescriptions
The big question, therefore, that the leadership had to squarely address in those years was, by what policies and strategy could it be possible to accelerate growth in a war-torn, underdeveloped country with a fledgling market economy and a tiny private sector? Nonetheless, at this point in history the developing world had not been granted sufficient space to formulate and implement policies other than those prescribed by the Washington consensus. However, Ethiopia from the outset defied such policy prescriptions based on the conventional wisdom of “one size fits all” and opted to formulate its own policy based on the objective reality of the country.
Indeed, we in Ethiopia had, from the outset, defined poverty as our biggest enemy with which no compromise is possible. It was our firm conviction, too, that in a country like ours, where the market and the private sector are at their rudimentary stage of development, no serious developmental undertaking that addresses this core existential issue would succeed without the proper role of the state. It is based on this conviction that, throughout the last 25 years, we committed to promoting and defending our national economic development path, which gives the state a prominent role in influencing the speed and direction of Ethiopia’s development. Yet, the path we have chosen allows for both the public sector and the market to play a complementary role in terms of generating national wealth marked by relative equitable distribution.
Development Led by Agriculture
Against the misgivings of neoliberal establishments, our initial answer to the daunting task of fighting poverty lay in the state-directed, agriculture-led development policy and strategy aimed at poverty reduction. This is because agriculture, and specifically that of the small-holding farmers, is the backbone of our economy on which depends the livelihood of the overwhelming majority of our people. Granted, our second Growth and Transformation Plan aims to lay the foundation for an accelerated economic transition led by the manufacturing sector, but we still continue to invest in small-holding agriculture as the main growth driver of our economy. There are times when severe drought occasionally reduces our agricultural output, as it did in 2004 and in this last harvest season; we have managed, however, to raise our agricultural production from somewhere around 7.5 million metric tons to over 30 million metric tons in 2014.
Increased production has enabled our nation to cope with the devastation of the 2015 El Nin@afoinduced drought that left millions of Ethiopians in need of emergency food assistance. The fact that no drought-related death occurred despite the severity of crop failure, I believe, speaks to the capacity and resilience of our agricultural economy to absorb natural disasters.
Climate change is no doubt one of the biggest challenges of our planet. That is why only a concerted global response can mitigate the terrible consequences of climate change, particularly for countries dependent on agriculture. To do our part, we have already put in place a Climate-Resilient Green Economic Program, which is bound to make our country less vulnerable to the vagaries of climate change. We are proud that with every passing year millions of Ethiopian farming households are investing their energy in water and soil conservation projects across the country. This had been one of the main reasons that Ethiopia was able to withstand the effects of the El Nin@afo induced current drought.
It is not by accident that Ethiopia today is rated as one of the fastest and most equitably growing economies in Africa. Ethiopia has allocated 70% of its budget for pro-poor programs, such as education, health, agriculture, and food security, which helped it to register an average economic growth rate of 10.6% over the last 13 years.
However, we are the first to caution ourselves against the danger of falling into complacency by forgetting that such a high rate of growth is an index of a weak starting base. In any event, our tiger rate of development still gives us much hope and confidence in our ability to attain the goals envisioned in our ambitious second Growth and Transformation Plan.
Towards Rapid Industrial Development
While we have given agriculture the top-most priority in the last decade, Ethiopia is gearing itself towards a rapid industrial development as well. To this effect, it has initiated a massive micro and small enterprises development program, together with the expansion of medium and heavy industries. We have heavily invested in micro and small-scale enterprises with high social return in the form of reduction of unemployment. Like many developing nations where the number of the young constitutes the majority, creating job and employment opportunities and gender empowerment are very critical to Ethiopia.
Investing in the development of micro and small enterprises, as a launching base for industrial development, has not only alleviated poverty to an appreciable degree; it has also given rise to a sizable middle class and business community with sufficient capital to invest in the growing manufacturing and service sector of Ethiopia.
Social development is equally important if Ethiopia is to continue with the pace of development that it has initiated. Hence, today, over 28 million citizens are attending school in one grade cycle or another. This is the equivalent of educating the entire demography of the 20 African countries having less than four million population.
In addition to this, with our flagship primary healthcare program, we have deployed close to 40,000 health extension workers across the country during the last decade. Thus, Ethiopia has managed to reduce the child mortality rate by close to 30% in the past five years alone. The proportion of people living in abject poverty has declined by nearly 35% in the last fourteen years. As a result, life expectancy at birth has risen from 45 in 1991 to 64 years in 2015. These results, I believe, are a testament to the effectiveness of the pro-poor development policies and strategies that the Ethiopian developmental state, previously led by the late Prime Minister Meles Zenawi, has achieved.
In line with this, Ethiopia has embarked on nurturing the private sector as the engine of our industrial development. A glance at the visible renovation of our cities, a function of the urban renewal program led by the newly created private sector, suffices to demonstrate the important role Ethiopian entrepreneurs play in our overall development today. Without this pivotal role by the private sector, the current rapid economic growth would have remained a pipe dream.
Large Infrastructure Projects
In the age of globalization, increased private sector investment, which is necessary for a competitive economy, obviously depends on the availability and expansion of physical infrastructure. Today most of the major mega-projects in Africa are found in Ethiopia. The Grand Ethiopian Renaissance Dam (GERD), which is one of the largest in Africa, will produce 6,000 megawatts of electric power at completion, and the national railway line project, covering the entire north-south and east-west axes of the country, are only two good examples in this respect. The fact that Ethiopia has started graduating around 70,000 students in engineering and science fields every year plays a pivotal role in the development of its engineering industry.
Likewise, though fraught with difficulties, Ethiopia has cultivated a good and peaceful, neighborly relationship with most of the countries in the Horn. The fact that Ethiopia has initiated some infrastructural programs with Kenya, Djibouti, Sudan, and the South Sudan is expected to have a much broader impact in terms of sustaining the cooperative spirit toward a better regional integration.
One cannot, however, underestimate the difficulties of sustaining diplomatic and trade relations in the Horn of Africa, a region threatened by international terrorism. I believe this represents one of the most serious challenges that need to be overcome in order to build this new economic belt through the Silk Road.
From the above limited facts, it can be seen that Ethiopia is indeed registering rapid change in every aspect, which is why it has become one of the preferred destination points for foreign direct investment in Africa. A trainable young workforce, a stable political system, a rapidly transforming society that contains the second largest population on the continent is, we believe, the best venue for those who would like to engage in long-term investments. Ethiopia’s efforts to join the global community, in the new expanded Silk Road, are based on such thorough preparation.
One Belt, One Road
Dear Friends, Ethiopia considers China’s Silk Road Economic Belt and Maritime Silk Road projects, jointly known as “One Belt and One Road,” as another milestone opportunity that could contribute to Ethiopia sustaining its economic development, together with all the countries in our region. We believe, as the last decade or so has witnessed the resurgence of trade between Africa and the East, the new Silk Road would also further strengthen the mutual benefits of expanded trade between nations. This will also apply to the relationship between Ethiopia and its traditional partners. The fact that not only development assistance, but also foreign direct investment from Europe and the United States had been instrumental in the rapid economic development of the country, is another proof that mutually beneficial relations could bring about a guaranteed positive outcome.
Finally, I would like to conclude by saying that, since the adoption of a new economic direction 25 years ago, we have come a long way. We were able to achieve double-digit economic growth for over a decade, build important governance institutions, significantly increase our contribution to regional and continental peace and stability, and put in place major infrastructure networks for regional integration. We are conscious that the journey ahead of us will continue to be challenging, as we have to overcome the adverse effects of climate change.
As a country, Ethiopia is determined to realize its vision of becoming a middle-income country by 2025. To this end we will strive hard to strengthen and nurture our fledgling democracy, as well as peace and regional stability. We draw inspiration from the great achievements of the last two and half decades, as we prepare ourselves to further build our country’s competitiveness in the current global framework. Together with our neighbors in the region, we are determined to attain an Ethiopian, and indeed an African Renaissance which can harness the new possibilities opened by developments like the New Silk Road.