The world has come to a grinding halt because of the coronavirus pandemic. Factories have stopped operation. Corporations that generated millions of dollars every day have ceased functioning. No one seems immune to the health, economic and social hazards of the ongoing crisis. With no end in sight yet, businesses are being forced to lay off their highly valued employees as their expenses surpass the revenues they generate.
In a speech in 1959, J. F. Kennedy famously said “when written in Chinese, the word ‘crisis’ is composed of two characters – one represents danger and one represents opportunity. Maria Langan-Riekhof, Director of the Strategic Futures Group at the National Intelligence, and others have gone so far as saying “sometimes the world needs a crisis” to turn challenges into opportunities.
Like the rest of the world but perhaps more than most, the Coronavirus poses an unprecedented existential challenge to Ethiopia. If current projections of the spread of the pandemic hold, the country will see the gains from recent rapid growth, now totally wiped out, the poverty level more than doubled, its economy shattered, export revenues drastically reduced, its external debt servicing shooting to an unsustainable and dangerous level, its social and political order enormously tested and even threatened, and its population decimated by death, illness, hunger and famine.
Issues for Debate
Ethiopia now stands at a defining moment whether or not to develop the private sector economy, if at all. The institutional inefficiency of the state economy, the low productivity trap of the population economy, and a growing surplus of labor underline the need for a long-term strategy of private sector development in Ethiopia. The economy cannot operate as usual and massive strategic change is inevitable. One of the core strategies and policies of private sector development in Ethiopia is the launching of institutional reform in the area of property rights. In political economy, there is a consensus that property rights matter a lot for investment incentives, efficient resource use, and economic growth.
Although development banks have existed since the imperial era, there has not been a time where they played as significant a role as in the past fifteen years. The developmental state paradigm, which was adopted since the mid-2000s, has given renewed impetus for development banking.
The economic policy that envisages fast-track industrialization has developed successive industrial policies. Credit policy has been the lynchpin of the industrial policies. As a result, both state-owned banks, the Commercial Bank of Ethiopia (CBE) and the Development Bank of Ethiopia (DBE) have emerged as major policy instruments.
By Abiy Ahmed, Prime Minister of Ethiopia
There is a major flaw in the strategy to deal with the coronavirus pandemic. Advanced economies are unveiling unprecedented economic stimulus packages. African countries, by contrast, lack the wherewithal to make similarly meaningful interventions. Yet if the virus is not defeated in Africa, it will only bounce back to the rest of the world.
That is why the current strategy of unco-ordinated country-specific measures, while understandable, is myopic, unsustainable and potentially counter-productive. A virus that ignores borders cannot be tackled successfully like this.
We can defeat this invisible and vicious adversary — but only with global leadership. Without that, Africa may suffer the worst, yet it will not be the last. We are all in this together, and we must work together to the end.
Fragile and vulnerable at the best of times, African economies are staring at an abyss.
Let me illustrate this with the situation in my own country.
Ethiopia has made steady progress in the provision of health services over the past two decades. But nothing has prepared us for threats posed by Covid-19. Access to basic health services remains the exception rather than the norm. Even taking such common-sense precautions as washing hands is often an unaffordable luxury to the half of the population who lack access to clean water.
Even seemingly costless social distancing is hard to implement. Our lifestyle is deeply communal, with extended families traditionally sharing the burdens and bounties of life together, eating meals from the same plate. Our traditional and rain-dependent agriculture is dictated by the fixed timeframes of weather cycles in which planting, weeding and harvesting must happen. The slightest disruption to that chain, even for a brief period, can spell disaster, further jeopardising already tenuous food supply and food security.
Take Ethiopian Airlines, the country’s largest company, which accounts for 3 per cent of national output and is a major source of hard currency. It will be pushed to the brink as its business is upended by the pandemic. Shortage of hard currency will then make it all but impossible to source essential medical supplies and equipment from abroad. The cost of servicing our debts is already often more than our annual health budgets. The list continues.
This grim reality is not unique to Ethiopia. It is shared by most African countries. But if they do not take appropriate measures to tackle the pandemic, no country in the world is safe.
Momentary victory by a rich country in controlling the virus at a national level, coupled with travel bans and border closures, may give a semblance of accomplishment. But we all know this is a stopgap. Only global victory can bring this pandemic to an end.
Covid-19 teaches us that we are all global citizens connected by a single virus that recognises none of our natural or man-made diversity: not the colour of our skin, nor our passports, or the gods we worship. For the virus, what matters is the fact of our common humanity.
That is why the strategy to tackle the human and economic cost of this global scourge must be global in design and application. Health is a worldwide public good. It requires global action guided by a sense of global solidarity.
But Covid-19 has also exposed our dark underbelly. The world community desperately needs global-level leadership to tackle swiftly pandemics such as this, and in a way that is institutionalised rather than ad hoc.
A good place to start is with the World Health Organization. As countries with the necessary resources focus on fighting the pandemic through their national institutions, the WHO must be empowered and resourced sufficiently to co-ordinate responses globally and directly to assist governments in developing countries.
In the meantime, the G20 must provide collective leadership for a co-ordinated global response. There is no time to waste: millions of lives are at risk.
Building on what has been announced by international financial institutions, the G20 must launch a global fund to prevent the collapse of health systems in Africa. The institutions need to establish a facility to provide budgetary support to African countries. The issue of resolving Africa’s debt burden also needs to be put back on the table as a matter of urgency.
Finally, all of Africa’s development partners must ensure that their development aid budgets remain ringfenced and are not diverted to domestic priorities. This is where true humanity and solidarity must be demonstrated. If such aid were ever necessary in Africa, it is now more than ever before.
This article originally appeared on Financial Times.
The miracle of South Korea is an earth breaking economic phenomenon witnessed over the past half-century. Before stepping into the miracle story of the Han River, we need to bow to the man who made the impossible possible, Park Chung Hee. This is the man who led the foundation of the miracle by seizing power through the orchestration of the May 16, 1961 military coup in Seoul. At that moment, Korea was one of the poorest countries globally by pure virtue of registering a per capita income of just USD79. In 1963, Park won the democratic election and extended his leadership for four election periods until he was assassinated 13 years later.
There have been notable recent strides in Ethiopia with regards to the political participation of women. A gender balanced cabinet as well as the appointment of the first woman president has shifted the narrative on political participation and presented a ‘new normal’ where young girls can now view high-level political positions as achievable. These are all noteworthy progresses that have resulted from the current administration and deserve applause. However, given that inequality in political spaces is systemically entrenched, the progressive strides require structural enablers for sustainable equality to take root in an institutionalized manner.
Foreign aid has become a key cornerstone of governments’ budget in developing countries like Ethiopia. Despite the widely believed narration of Western governments aiding the developing world, there are concrete arguments showing that it is, in fact, the developing world that is supporting the development of the Western world. According to a 2014 report, Africa receives about USD133.7 billion each year from official aid, grants, loans to the private sector, and remittances, among others.
The policy and institutional framework for regional development plays an important role in the solving of massive unemployment, provision of greater and diversified volume of production, better infrastructure (soft and hard), improved community services, rising average wealth, and improved quality of life. A region is a constituted social order with people engaged in distinct political, cultural and economic practices. These practices are embedded and developed historically and sustained and reinforced within networks, processes and infrastructures.
Samrawit Fekiru
Ayele Gelan
Alemayehu Geda (Prof.)
Tsegaye Tegenu (PhD)
Abdulmenan Mohammed Hamza (PhD)
Ethiopian Business Review
Alula Nerea
Bethlehem Mengistu