Ethiopia Past and Present through the eyes of a seasoned Economist

December 13, 2018 Africa , Interviews , Opinion , OPINION/NEWS , OTHER

EPA photo

Ambo Mekasa interviews Ato Getachew Minas

Ethiopia is one of the developing countries in the world. Its economy suffers from different challenges. One of the challenges has been misguided leadership in economic management, so I have of late invited economists to identify these challenges and suggest solutions.

Our guest today is a senior economist, Ato Getachew Minas, who had severed three governments as a civil servant. He was born in Addis Ababa 1947. He earned his BA in Economics from Haile Selassie I University in 1970. In 1974 he had earned his MA in Economics as a regular student from the Northeastern University, in Boston, Mass. USA. Upon his return to Ethiopia, he had served in different government offices like Ministry of Labor and Social Affairs and the Ministry of Finance and Economic Development. Ato Getachew is married and has five grandchildren.

Ato Getachew has ample experience in the economic sector and a vivid picture of the past and current economic performances and trends. I had the opportunity to discuss with him the past and current economic situations in the country.

How did you manage your education in the USA? Tell us also about your stay there.

Getachew: My educational stay in the USA was very interesting. In those days regular graduate courses in the USA were very tasking. We lacked mathematical and econometric skills as basic requirements for following up economic courses. We had been given orientation courses in Colorado University on these skills for two months. Eighteen Ethiopians attended the orientation before they were assigned to different universities. I enjoyed Boston and its wonderful community. I had an American family assigned to me. That family was culturally and materially rich to help me appreciate the mixed society of USA.

What were the economic situations during the Emperor’s regime?

Getachew: The imperial regime, which was essentially feudal and bourgeois, controlled rural land as means of agricultural production and urban small-scale industries and services. Ruling class was mainly interested in ownership of means of production for prestige. This deprived the rural peasants land to farm on and subjugated them to abject poverty due to the required transfer of at least half the produce to the absentee landlord. Urban businesses flourished where foreigners were playing active role in manufacturing and service sectors. Local businesses were encouraged to compete with foreign small businesses. Basic services such as education, health, water, electricity, telephone, roads, housing, banking, facilities were cheap and accessible to urban dwellers; the reverse was true for the rural people

The Imperial era was the beginning of everything in the country. It was a time that many modern infrastructural facilities, social as well as economic services were created. It was a period when national bank, transport country services, universities and other economic institutions were formed and inaugurated. Consequently, the imperial era was marked by fast economic growth. Since it was the beginning of modernization, economic and social enterprises were on the right track of development.

In addition, there was little or no inflation at that time. The value of Birr was high; the exchange rate of one American dollar was two Birr and seven cents. This is just one indicator of economic performance, particularly in the country area of foreign trade.

How did the Emperor manage to tackle unemployment?

Getachew: To curb unemployment several strategies had been adopted during the imperial rule. One of these strategies is agricultural development with emphasis on agro-industry. The Awash Valley Development Project was one of the projects in which graduates from the Agricultural University of Alemaya (now Haromaya) and the Agricultural College of Jimma were encouraged to engage in extensive modern farming that absorbed thousands of skilled and unskilled agricultural workers. Initially, the Imperial Government established the Awash Valley Authority (AVA) with duties and responsibilities to clear the valley from malaria and allocate land to the young graduates. The Development Bank of Ethiopia provided them with credit, while the AVA supplied technical support.

The graduates were treated as investors, who took the responsibility for purchase of agricultural inputs such as tractors, combine harvesters, vehicles, improved seeds, fertilizers, tracks, trailers, store, etc. They also had their headquarters in major cities and in the capital city. These offices handled export of farm produces such as cotton, sesame, oilseeds and pulses. Food grain was produced for local markets. The National Bank of Ethiopia, the Commercial Bank, and foreign banks efficiently handled export of produces and import of agricultural machineries and inputs.

The Imperial Government of Ethiopia established Agricultural Research Institutes from which graduate investors benefitted enormously. These institutes supported both the peasant farmers and modern agribusinesses. As a result agricultural output and employment opportunities boosted tremendously. Both output and income grew together, with enormous marketable surplus. This made life happier and tolerable for the working class of the day. One could say that overall unemployment was reduced due to incentives and encouragement provided by the Imperial Government for the expansion of modern agricultural enterprises in the country.

What reasons do you attribute to the weaknesses of the Emperor, Derg, and EPRDF?

Getachew: During the imperial regime, almost all the rural land was under the control of a few landlords. They used to take the lion’s share of yields produced by tenant farmers. The farmers faced hunger and misery due to unjust exploitation. In most cases tenants could not complain because of fear of eviction with immediate effect. Due to shortage of income they could not satisfy the needs of their families’ basic needs nor did they purchase productive inputs to boost their produce. Lack of ownership of the means of production hampered the peasants from using modern inputs as instructed by Agricultural Development Agents (ADA).

The imperial regime, including landlords, government officials, regional governors, and local administrators, spent their time guarding their power and authority rather than harnessing resources for boosting the country’s economy. In this endeavor the church cooperated with the state, as a mutual partner, owning about one-third of the land. The church was a favorite institution of the state, endowed with imperial favors, sometimes not paying proper tax to the government.

The fact that peasant agriculture was dominated by absentee landlords, lack of proper attention to peasant farming and nomadic communities, and inapplicable and inappropriate agricultural services caused the economic underdevelopment of the country. This led to massive unrest among university students, who seriously opposed the imperial regime, and who argued for a total overhaul of the imperial system and called for socialism as a panacea of the time, the 1960s.

The Military Government of Ethiopia, known as Derg, with civilian intellectuals behind it, intended to make all Ethiopians equal. It declared socialism as its guiding dogmatic creed, which helped it gain the support of the academic circle, students and other intellectuals in the country. Socialism was copied from the USSR, regardless of its relevance to the reality in the country. The large majority of the people did not have any idea of the imported ideology that was damped on them. Socialism could not change the lives of the people at large. It led to massive executions, expropriations of properties of poor citizens and to civilian hostilities, conflicts and liberation movements. These were the big challenges the military regime had to face, resulting in political conflicts and crippling of the economy.

In addition, the sanctions on and rejection of the “socialist military” government by the Western countries created havoc to the economy. The economy also suffered from civil wars and invasion from neighboring Somalia.

The military regime was overthrown by Ethiopian People’s Revolutionary Democratic Front (EPRDF). The EPRDF was fully supported by the Western powers; they provided it with economic support that crystallized into visible changes in the economy of the country. However, the people suffered from mal-distribution of resources and economic benefits. Ethiopians also suffered from trade imbalances, declining rate of export that resulted in low foreign exchange reserve, unequal distribution of national income, lack of good governance; corruption, graft and theft in the state sector and in public business enterprises. These resulted in the weak performance of the Ethiopian economy for over two decades now. Consequently, the poor people of Ethiopia suffer the resultant inflation that broke their backbone. The imbalance between supply of and demand for basic goods and services could not be corrected due to shortage as well as misuse of productive resources.

What do you think are the main causes of unemployment in the country?

Getachew: The unemployment rate is rising at an alarming rate in the country for the last three decades. Several reasons are ascribable to it. First, the educational system is producing thousands of graduates every year that could not be absorbed in the economy. This was due to mismatch between available skills and skills required by the economy; in other words, skills supplied by the educational and training system in not fully employable. Most graduates, however, remain unemployed due to lack of creativity and entrepreneurship. They are not engaged in self-employment as some of them aspire to be government employees. These created a sense of dependency of the youth on the state rather than on its entrepreneurial drive. If such dependency is high, bread winners may not have enough to support their dependent families.

Second, big private companies, which can absorb many employees, are not created yet. Without the private sector, the state may not be a reliable and stable employer in the country.

Third, high tax rates are levied on citizens and businesses discourage consumption and economic expansion. This is one of the big challenges for many people that aspire to be creative and entrepreneurial. Apart from direct taxes such as VAT, citizens are required to pay high surcharges such as sugar fund, road fund, etc. It has been reported that the government could not collect enough tax due to poor tax administration. As usual, taxpayers complain and, therefore, propose tax reform that leads to fair tax system and to high revenue that accrue to the government. The tax system could be reformed with the objective of business expansion, encouraging consumption and more investment, with positive effect on employment.

Another factor that enhanced unemployment is the failure to maintain projects that had been started during the imperial period. Agro-industries and farming enterprises were doomed to nationalization by the Military Socialist regime. They all failed and closed down leaving all their employees join the army of the unemployed.

The current regime has no notion of a strategy of human resource development and utilization. The country is producing a huge number of graduates from its educational and training institutions. But, the economy is not using them productively. Many Ethiopian graduates depend on families and relatives for their survival. They are discouraged job-seekers who neither find jobs nor engage in self-employment. We have to engage in awareness creation programs that create confidence and self-reliance in the Ethiopian youth.

What kind of policies should the government pursue to resuscitate the economy?

Getachew: The current policy the government is explicitly stated. We have to stop copying policies and tailor new ones the effect of which is not known. The government should adopt economic policy in line with the reality in Ethiopia. We do not have to import ideologies any more. The emperor imported the ideals of the bourgeois but it was not much helpful. The Derg imported socialism which led the country to great destruction of the country. The EPDRF also imported economic policies into the country. So, every time a government changes in Ethiopia, it imports policies, whatever the reality of the country might be. Such a tendency of new governments to import policies indicates weaknesses of governments. We have to be courageous enough to develop our own development policies, based on research conducted in the country, taking into account of the needs and interests of the people.

Currently, there are contradictory policies in the country. The land tenure policy of the Military Government is still applicable. Yet, the goal of “land to the tiller” is diverted to “land to the State.” The military regime confiscated land from landlords and gave it to the State. The current government enjoyed possession of land as a source of real power for subjugating the landless peasants and urban dwellers.

What do you think about the changes currently underway in the country?

Getachew: The change is unexpected for me. So far, It seems peaceful as it is taking place tactfully. Prime Minister Doctor Abiy Ahmed has done a great contribution to the country. He believes in love, mercy and unity to sustain the country. He has great belief in the social capital that maintained its independence for millennia.

During the course of the last thirty years, the country was on the brink of destruction. It was smothered by a malevolent rule on par with Nazism and Fascism, based on “Divide and Rule.” Tribal wars had been encouraged by the EPRDF until PM Dr. Abiy Ahmed came to power in March, 1918. Thanks to his leadership, the country is saved from the worst form of self-destruction.

Now, we are hoping to see a better tomorrow. The action being taken by the government on corrupt officials is appreciable and should be continued. Let us stand together and save the country and bequeath a united and strong nation to the coming generation.