regional growth varies

Regional Growth Varies as Unfair Resources Distribution Persists

In Ethiopia, some regional states are more developed than others while the rest remain behind in terms of economy, investment and trade as well as social and infrastructural development. The wealth distribution among the regions is not also fair. Despite the substantial regional inequality, tackling the wide gap still remains a big challenge. In the past, there were different policy prescriptions put forward to manage the inequality, but none of them were able to bring a solution to the growing inequality among regional states, largely because of the politicization of the matter. EBR’s Ashenafi Endle explores.

Located in the Southern Regional State, Kaffa zone, which is the source of coffee, among many of its immense natural potential, can be an example for the unbalanced growth existing among regional states and localities in Ethiopia. Although Kaffa is known for its surplus production of honey, natural coffee, maize, spices, timber, beans and livestock, among others, access to the market is impossible because no infrastructure is built in the area. Outputs from this area have to go extra and unnecessary routes to reach the central market. Even though the area had a glittering civilization in the past, it could not re-flourish in modern Ethiopia. Traders, farmers and residents in Kaffa have been demanding for access to roads, airport, clean water, hospitals and higher education facilities for at least the last decade.

Irritated by such marginalization, thousands of residents of Kaffa asked Prime Minister Abiy Ahmed (PhD) when he visited the deteriorated Bonga, the zonal town, on September 2019, to consider their call to become an independent regional state separating from the Southern Regional State.

In fact, all the ten zones in the Southern Regional State officially requested to become independent regional states. But only the demand by Sidama Zone was accepted by the government. “Becoming an independent region is not the magic bullet for all problems related with development, which still remains unanswered,” the Premier said.

The question for equity is the main driver behind the wave of self-determination calls currently nerving Ethiopia. Many localities living in different regional states were unable to benefit from significant development in the past 27 years under the federal system. Major

Development projects are usually used as a political string pulled and executed from the center based on strategic alignment or bargaining power of the specific region. Since the capacity of the central government in addressing the development needs of the regions along with its ability to distribute developmental projects is very poor, the only alternative left is giving the opportunity to regional and local governments to develop themselves. Fundamentally, the unequal economic growth of regional states in Ethiopia is attributed to unfair distribution of infrastructure. As the result, some regions have better investment inflow, productivity, per capita income, and job opportunities, while others a forced to migrate for better opportunities, or perhaps, take on the political struggle.

A report compiled by the House of Federation also proves the unfair distribution of infrastructure projects across regions which triggered the House to establish a committee that assesses equity in infrastructure distribution. “We have suffered a lot because of uneven distribution of resources across regions,” says Adem Fara, Deputy President of State of Somali.

Erstu Yirdaw, President of the Southern Regional State, also stresses that with a large workforce, enriched natural environment and vast land, the region could have witnessed better growth rates if only the central government had a wise project distribution mechanism. “Remote areas are utterly neglected. They have no basic infrastructure like roads, power and telephone networks. They also don’t have proper markets and distribution channels to exchange goods with border towns and consumers in other parts of the country,” he tells EBR.

Infrastructure: wealth or means to production?
Infrastructure investment, especially on roads, has been the main driver of Ethiopia’s GDP expansion over the last 15 years. In terms of connectivity, coverage of new roads increased from 26,000km to 127,000km, over the last 21 years. However, this is only 32Pct of the road demand of the country, according to Six Abrar, Road Information Analysis and GIS team leader at the Ethiopian Roads Authority (ERA).

In this fiscal year alone, the government allocated the largest budget amounting to ETB46 billion for ERA. “The government focused on roads for two main reasons. The first is to increase output by expanding the roads and bringing the market near to the producers. The second is to cut sales tariffs in the country by improving the roads. The fuel cost and service life of vehicles improve by 45Pct when the road is upgraded from gravel to asphalt,” elaborates Six.

Roads built by the federal government has connected 95.7Pct of woredas in the state of Tigray, 82Pct in the state of Amhara, 81Pct in Southern regional state and 73.6Pct in the state of Oromia, the least being 57Pct in the state of Somali, according to a report by Subsidy Budget and Concurrent Revenues Rationing Standing Committee at the House of Federation released in May 2019. Tigray and Gambela have only two woredas that are not linked with a federal road, which stirred up controversies, although the former released a statement claiming the report released by the Committee is not factually correct and made a wrong conclusion without taking the administration changes into account. Additionally, 92Pct of the woredas in the state of Tigray are connected with concrete asphalt, while it is 51Pct in Amhara, 46Pct in Oromia and the Southern Region, 45Pct in Afar, 39Pct in Gambela, 25Pct in Benishangul and 15Pct in Somali.

The report compiled by the House of Federation stressed that public institutions mandated to develop infrastructures have three major problems. ‘The first is the lack of a clear and proven formula for project distribution across regions and cities. Although the federal government claims projects are approved based on demand and rate of returns in a specific region, the reality is different. The second is deliberate data manipulation by consultants and supervisors who undertake feasibility studies. The third problem is the involvement of officials at every rank in order to influence where, what and how projects are built.

“Most of the projects have no design after they are started or done, let alone a feasibility study,” argues Tadele Ferede (Prof), Lecturer at Addis Ababa University (AAU) and the President of the Ethiopian Economics Association (EAA). “For instance, the Ethio-Djibouti railway was finalized but needs trucks between the loading/unloading stations and where the train ends. Building a railway without linking joints is attributed only to ignorance,” says Tadele.

Only 2,531 kebeles in the Southern Regional State (66Pct of the total kebeles in the region) are connected by all-weather roads, according to data from ERA. Similarly, the states of Oromia, Amhara, Tigray and Benishangul are connected above 60Pct, while the rest are far below. For instance, the figure stood at 30Pct in the state of Somali.

Considering its vast area, Oromia with 6,478 kebeles, which constitutes 42Pct of all Kebeles in the country, connected 93Pct of its kebeles, above the 76Pct national average. Yet, despite the considerable finance invested on road constructions across the country, regions always complain about equity of resource distribution. “We build roads based on its contribution to the national economy. And, as the government has never given us the right amount of budget we request, we have to use the money only for top priorities,” says Six.

Other major public projects carried out by the federal government includes universities, airports and industrial parks. In terms of airports, almost all the regions have complained. For instance, the southern and western part of the country have no airfields at all. Business trips and fresh produce from these areas are always in danger because of sluggish mobility. The vast Oromia, Amhara, Somali and Southern regions have one or two airfields each, while Tigray has three.

In terms of universities, many localities have found their promises. The number of public universities increased to 45, of which Oromia leads with 12 followed by Amhara and Southern regions with 10 each while Tigray has four. The rest of the five regions have one or two, except the state of Harari, which has no public university.

Experts question the distribution of universities, concluding that they are constructed to address the ethnic based competition, rather than adding value to the human capital. For instance, many in academics argue that the state of Harari deserves a specialized university to study its historic civilization and surviving social and urbanization aesthetic values. However, that could not be realized, fundamentally because the regional state has no influential power in the political realm.

The other bone of contention is the construction of industrial parks. Even though industrialization, export and job creation are the main rationale behind the development of industrial parks (IPs), their location is decided mainly by the influence of the regional powers. Oromia and Amhara have five IPs each while Tigray and Southern regions each have two. The rest have none.

In terms of 3G network infrastructure, Amhara leads with 71Pct, Oromia with 66Pct and Southern region with 64Pct, while for the other regions it is below 40Pct. In terms of electricity, 21Pct of Tigray has access to electricity, followed by 15Pct in Oromia, 10Pct in Amhara, nine percent in the Southern region, and 4.5Pct in Somali.

The availability of these infrastructures determines the investment flow to the regions. Yet, the expert, who prefers to remain anonymous, underlies the project distribution in regions in Ethiopia is fundamentally wrong because the economic strategy of the country itself is wrong.

“They have been trying to see development in the ethnic-based political box. A region which has a stronger say in the party politics, especially the ruling party, is confirmed to get the large portion.”

According to the expert, projects are categorized into three. The first is those financed by the federal government. This usually goes to where it can have a better political impact. The second is financed by enterprises and FDI, which also has affiliation with party politics. The third is regional states themselves, which is limited by finance, among other challenges. “If an official thrives to develop his region, the central government usually sacks or moves him to other areas. But if they are corrupt and careless, they can stay in power and do whatever they want. Under the existing system, you can enrich your pocket but not a specific region,” the expert says. “The central government is afraid that if one region progresses well, the others might bear a grudge.”

He recommends giving economic autonomy for all as a solution. “The central government should leave strong regions to go on by themselves, limiting itself to strong regulation and supervision. Then the central government can also save enough time and resources to support only regions that are backward and have been marginalized in the past. The region’s residents know its own problem and not the people at the top.”

Melaku Alebele, Deputy President of State of Amhara, also recommends that more economic autonomy must be given to the regional states so that they won’t be dependent on the federal government. “Besides taking corrective measures in resources distribution, which is unfair because of underestimation of the population during the last census and politicization of the matter, the federal government must work on building the capacity of the regions to enable them to run their economy efficiently, rather than being dependent on it.”

Supply side: From transforming to reforming
The infrastructural projects could not integrate into the economy and boost productivity mainly because the projects were installed in regions in an unbalanced manner. Regions with immense potential but no political influence are still stranded in backwardness and poverty. The growth of Ethiopia over the last decade is hinged only in a few corners, while areas that could have decentralized growth are further marginalized. “We need to ask why structural transformation failed in Ethiopia. Despite investing hugely in infrastructure, the supply enhancement could not be realized. Despite also developing the human power and providing industrial incentives,” says Eyob Tekalign (PhD), state Minister Finance (MoF), a leading actor behind the ongoing deep reform, which seems from developmental state to neoliberal, pragmatically.

Currently, the government is rolling out a new economic reform, at the core of which is shifting the economy towards boosting the supply side in order to balance the economic growth that has been staged by government investment in infrastructure over the last 15 years. “This reform is comprehensive and fundamental unlike the fragmented reforms repetitively taken in the past. This one is not bounded by any type of ideology or model,” Eyob says. “Its primary goal is increasing supply, instead of focusing only on demand side of the economy.”

Yinager Dessie, governor of the central bank, affirmed that the government’s focus from now on will be boosting productivity on the supply side by using the infrastructure built so far. “We do not need to build more universities, for instance. The main task now is channeling the graduating workforce to employment and integrating the infrastructure to the economic outputs,” he tells EBR.

However, the output of the economy still requires re-evaluation and auditing of the existing infrastructure in order to know how much it is really viable for the next productivity effort, according to economic analysts. After the auditing, gaps can be identified. This will make it easier to decide whether to build new infrastructure, upgrade, or use it as it is. If the inequality across regions sustains, the productivity gap will widen further.

Currently, the MoF established an equity committee, which is finalizing the evaluation of the return on investment of over 1,000 big projects across sectors, in all regions, according to Haji Ibsa, Communications Head at the Ministry of Finance. The committee was established following the continuous grievances from regional governments over the unfair distribution of projects across major sectors, in addition to the need to evaluate the real impact of the projects on the economy.

In 2019/20, the House of Federation launched a new task to conduct assessment on the fairness of the federal infrastructure distribution. The House is also revising the budget and shared revenue allocation formula.

8th Year • Oct.16 – Nov.15 2019 • No. 79

Ashenafi Endale

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