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In the last quarter of the 2010/11 budget year the Ethiopian government introduced the five year Growth and Transformation Plan (GTP) hoping to boost the economy’s performance by two fold. Approved by parliament on October 2010, the GTP aims to increase the GDP by 11 to 15 percent annually for the next five years. Except for Girma Seifu, the lone opposition Member of Parliament, everyone voted to endorse it.
The GTP anticipates that Ethiopia will become a “middle income” country by the end of the five year period. Prime Minister Meles Zenawi said the GTP will transform the country beyond reversal by doubling the economy in just five years with an average yearly growth rate of 11 percent. One of the priorities of the plan is to create more jobs for the youth who elected the EPRDF and another is to end decades of food aid.
A major part of the plan is for all state-run and private banks to help boost national savings. The construction of railways, roads, factories and housing are all painstakingly drawn in the GTP with specific figures.
Implementation of this great plan began through the 2010/2011 budget. After two years it is natural to evaluate the actual implementation of the GTP.
It may be easy to suggest that the railway project looks a failure from the start. The Ethiopian government plans to construct about 2,000 Km of rail lines during the five year Growth and Transformation Plan program. But of the many projects designed to be completed in five years most of them have not yet been started. Projects set to be constructed across the country are just in the stage of feasibility studies. Of course, signing ceremonies with the Chinese and Turkish companies took place recently at the highest government levels.
For instance the Ethiopian Railway Corporation (ERC) signed a USD 1.7 billion contract agreement with Turkish company Yapi Merkezi Construction Industry Inc., to construct 389 Km of the Awash-Woldia/Hara Gebeya Railway Project on June 26. A week earlier than this, ERC signed another contract with the China Communications Construction Company (CCCC) for the construction of the 268.2Km Mekele- Woldiya/Hara Gebeya Railway project at a cost of USD 1.6 billion.
The second lot of the 340Km Me’eso-Dire Dawa-Dawale electric railway projects was awarded to another Chinese state owned enterprise, China Civil Construction Corporation (CCECC) in December 2011.
Another round of signing ceremonies are expected shortly with an Indian company, according to ERC’s official recent announcement.
Though it is publicly announced that the Chinese company, China Railway Eryuan Engineering Group Co. Ltd. (CREEC) has started constructing the 37.381Km Addis Ababa light rail transit project, on the ground there is no visible railway construction activities in Addis Ababa. Most of the deadlines for the projects to be completed are likely unrealistic.
What has so far been achieved in the construction of railway is the finance. Prime Minister Meles time and again mentioned that funding of the plan is one of the major threats to the GTP. The PM suggested that in order to assure the financial capacity, banks are being encouraged to boost national saving shares in the economy from the current 9.4 percent to at least 17.4. The shares, if possible, are expected to go as far 21.3 per cent. Despite this plan the government went ahead with the GTP before the country’s financial capacity had been developed.
It may sound odd to have such a huge plan of this magnitude without having the funds. But after the plan was drawn with empty hands, getting the funds from the Export-Import Banks, (EXIM Banks) of India, China and Turkey is seen as a great achievement in the last two GTP years.
The other plan that faced a serious challenge in the GTP is food security. Two years ago when the GTP was drawn it aimed ending decades of being on the receiving end of food aid. The government thought this would be possible from the rapid economic growth of the GTP. But this seems unrealizable. In the recent Global Food Index report Ethiopia stood a lowly 100th of 105 countries. The report found that the average individual needs 2300 calories per day to live a healthy and active life. What is interesting to notice is that people in the wealthy nations eat 1,100 calories above that benchmark while in low income countries, national food supplies fall, on average, 100 calories short.
The export of Coffee didn’t go as per the GTP. The government expected to gain USD 800 million from the export of coffee. But rather it declined drastically. This was compensated by the rise of gold exports. Chat (Khat) also brought a considerable earning in foreign currency.
The other success story is in the energy sector. The start of the construction of the Renaissance Dam with a capacity to produce 6,000mw is seen as a great success for the government. Though the project will not be completed in this five-year transformation plan, starting such a huge project funding on our own is a good accomplishment. Ethiopia has also been getting foreign currency through the sale of energy to the neighboring countries such as Djibouti and Sudan. An agreement was also signed with Kenya to construct the project that connects the country’s electrical grid with Kenya. The World Bank has agreed to fund this project.
As was proposed in the GTP despite the need for funds, the doors to foreign banks will remain closed during the crucial five year GTP implementation. China, Germany, Turkey and India have their banks’ representative offices here in Addis Ababa. But these banks’ offices support only their countries’ investments in Ethiopia.
Halftime report cards for the GTP are mixed. There are many success stories but it seems doubtful all the projects will be completed on time.