We thank
the Ministry of Finance and Economic Development for sharing its discussion
paper and Aiga Forum for presenting it to us. The paper provides good overviews
of the next five-year (2003-2007 E.C.) plan and what was achieved by the
previous five-year (1998-2002 E.C.) plan. What we can do is take the
information in the paper at face value and make a few comments and suggestions
for public knowledge and if the government is open for feedback. I welcome other comments including reactions
to my piece here.
The next
five-year plan can meet targets in education, health, housing, water,
agriculture and other sectors where the government has done well already. Road and
rail construction, energy and other infrastructure projects are always
difficult to implement, especially when a country does not have sufficient
capital, technology and trained manpower. The area of industrial development is
another challenge and all the elements (strategies) are well-described in the
plan (pp. 28 and 29). I would have preferred to see a strong proposal to create
a program of research in science and technology with a government arms-length
agency selecting and supporting innovative technology research projects. The
issue here is not only about manufacture industries. Subsistence agriculture also
remains so labour intensive that it continues to reduce productivity because of
farmers’ inability to plough and harvest in time. Is there any way that Ethiopia
finds a substitution for traditional methods of production, at least some form
of gas- or battery-powered ploughing and harvesting machine?
The paper
forecasts that industry will lead growth in the next five years (20.1%-21.4%),
followed by agriculture (8.0%-14.9%) and services (10.5%-12.8%) (p. 23). In
fact, there will be a contraction of the service sector, if we compare the projected
10.5%-12.8% growth rate over the next five years with the 14.5% growth rate in
2002 (base year). Meanwhile, the plan also
forecasts that the government will do a lot in MDG sectors, especially in
health, water and education ( pp. 41 and 42). This then results in an expansion of the service sector (in health,
education, water and other social programs), instead of a decline from the 2002
levels. Unless I am missing a point here (such as the
method of forecasting or classifying sectors), the projection of growth for the
service sector in the next five years does not appear consistent.
One
of the challenges encountered in the implementation of the previous (1997-2002)
plan and also the challenge in the next-five years is mobilizing domestic
savings. Instead of buying non-essential goods or services, could Ethiopians deposit
their money in banks which is then borrowed by other Ethiopians to open businesses
or by the government to finance projects? Ask local government workers and they
will tell you that these days the money is in the countryside. Perception or
reality, what is clear is that we may no longer attribute the lack of domestic
savings to poverty (i.e., the toiling mass have no money left to save). Tens of
millions of Ethiopians keep cash in their purses, pockets or under their
mattresses and roofs that can amount to billions of birr - money that does not
get circulated. How do you encourage
people to deposit in banks? First is education. People must have confidence in
the banking system. They must, for example, be convinced that somebody is not
going to pocket their money and escape to the Diaspora (not kidding!). They should
know that the government is legally responsible for repaying them. Second, take
bank services closer to villages. No one in the right mind would expect people
to travel long distance, say to Gondar city, to open bank accounts. Even then,
the environment in cities (traffic, security check points, line
ups, staff intimidation, and so on) make people uncomfortable. The
solution is to upgrade small postal offices and cooperatives in rural towns to
provide banking services. People will find these locations convenient and they
also get served by their own children. I
don’t find considering my suggestion here difficult unless it is the usual
bureaucratic indifference to the needs of ordinary Ethiopians. If you want to
mobilize domestic savings, you take your idea to the countryside and make it
work.
Tax
collection will also remain a challenge. As a country dominated by informal
economy, many of the economic transactions in Ethiopia go untaxed. To prove
this, travel across highland Ethiopia (where I am more familiar) and you will
find people selling crop produce, chicken, butter, fruits, eggs, goats, sheep, and
cattle and so on. If you recall, I once talked about recruiting and training
village tax collectors – equivalent of the traditional chika shum. Village tax collectors will know what their neighbours
are selling and so ensure that they pay sales taxes (one of the sources of
income for governments all over the world).
Of course everything should not be subject to sales taxes. Will this be
efficient? This is not the issue. The issue is the differences between collecting
some taxes (which can amount to billions of birr) and not collecting taxes at
all (zero income for the government). I can go around in a village early
Saturday morning telling people that 1) they have a responsibility to pay tax
to the state, 2) they are required to report to me what they are planning to
sell and 3) I am required by law to estimate sales taxes. This could be difficult to understand for
some of the people who wrote this plan because they probably have never been in
the countryside. As I mentioned above,
it is important to think simple. What I am proposing here is an example of a simple
economic or public administration concept that could be applied and developed through
trial and error.
We
may as well suggest that the government move away from expanding regular telephone
lines to concentre its resources on setting up the technological and
organizational infrastructures and training manpower needed to expand mobile
phone services. The experience from the previous five-year (1998-2002) plan
makes this argument strong (page 12).
From 1997 to 2002, the number of people using mobile phones increased
from 560,000 to 4 million (an increase of over 600%) compared with an increase
from 620,000 to 740,000 (only 19%) for users of regular telephone lines. Even the rapid rate of growth for internet
phone services surprises you: an increase of 900% (from 20,000 users in 1997 to
200,000 in 2002). One or two phone
companies here in Canada have started to offer mobile phone service packages that
substitute for regular telephone lines; in other words, traditional telephone
lines could be history soon. So, perhaps the timing is right to focus on more
accessible mobile phone systems.
I appreciate the emphasis placed on the evaluation
and monitoring of the five-year plan (p. 44). Manpower will be an important issue.
Do we have well trained demographers, statisticians, geographers, economists
and other experts for each Woreda or we are talking about one or two of these
professionals stationed in Zonal offices
spending much of their time pushing papers instead of collecting data on the ground?
The government should also encourage the formation of independent citizen-led
oversight organizations to monitor and evaluate how the plan is implemented and
results achieved. Currently there are Woreda “grievance officers” appointed by
the ruling party, and while they may take their role seriously, conflict of
interest issues (such as not asking their superiors serious questions) are not
avoidable, at least in the eyes of citizens.
This also ties to the work in the area of good governance.
Finally,
I have not seen government regulations governing the conducts of construction
firms that are making good money in Ethiopia today. Ethiopians want these firms
to live up to their promises of doing good work and respecting project
deadlines. They believe that some of the so called home-grown firms have taken
advantage of favourable government policies to sign project contracts without
developing adequate capacities. Moreover, the government should ensure that
construction firms do not harm the environment. I am sure many of you have seen
productive crop land that is damaged by bulldozers and heavy construction
vehicles or gravel, equipment and other construction waste left on good land
that could mean a lot for a subsistence farmer. If you are able to calculate
the space (land) used by all road network across Ethiopia, you will realize how much land
could be rehabilitated if construction firms are required to return land
damaged by construction works to its original state by planting trees and
grass.
Getachew
Mequanent
Ottawa,
Canada
September
6, 2010