World Bank and its role in Ethiopia’s development

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The World Bank (WB) is set to launch a new program in 2013 named the PEFA (Public Expenditure and Financial Accountability) project for the health sector.

It is a program designed to help Ethiopia meet one of the key goals of the Growth and Transformation Plan (GTP) and the global Millennium Development Goals (MDGs) which are set to end at a similar time in 2015 and will require USD 120 million.
The widely touted GTP has four main objectives set forth by the government; maintaining an average Gross Domestic Product (GDP) rate of 11 percent, attaining the goals set forth in the MDG such as health and education in the social sector, creating a stable democratic and developmental state and maintaining a stable macroeconomic framework.
“The strategy employed by the GTP envisions that using the current growth model, Ethiopia could reach a middle income country by 2020-2023, through the creation of a modern and productive agricultural sector with enhanced technology and an efficient industrial sector.”      
The announcement was made by Guang Z. Chen, Country Representative for Ethiopia at the World Bank. His remarks were made at the sidelines of the launch of the World Bank Country Partnership Strategy (CPS) for Ethiopia from 2013-16 at the Sheraton Hotel on December 19th  .
CPS is a World Bank document which is expected to be used as a vehicle for consultations with partners and stakeholders that provides an opportunity for building consensus on business plans. With a view to guiding the bank’s group business plan for four years, it also requires a framework for an agreement with the government on the bank’s work and act as an accountability tool to measure achievements. These are among some of its chief strategies.
WB says the new document, in its present shape, reflects lessons learned from past engagements such as its previous four-year program, the Country Assistance Strategy (CAS) completion report from 2008-12, a client survey made in January 2012 and the Country Portfolio Performance Review (CPPR) between 2009-2012.
It also says the document has been prepared through consultations made between February-May 2012, with concerned parties, such as federal and regional governments, development partners/ donors, local stakeholders like the private sector, CSOs and academia, eternal stakeholders like the Washington DC based diaspora, Foreign Direct Investment (FDIs) Investors present in the country, in virtual and face to face meetings.         
Direct budgetary support could restart by 2015, Bank involvement planned in geothermal project  
Chen also stated that the Bank may restart direct budgetary assistance as part of one of the instruments for its support to the government, by involving in sector operations, rather than providing macro budgetary support.
Another point Chen discussed was regarding the financing of energy projects, especially hydro power projects, which is being discussed and added that the Bank will try to see the cumulative impact of developing a hydro project, by the government or its partners with a special focus on Nile basin rivers. He also said the bank is finalizing preparations on a geothermal project it plans to get involved in.
The World Bank stated that, out of the about 50 percent share covered by its financing infrastructure portfolio, 20 percent is covered by the energy sector.  The Bank has already invested about USD 1 billion on ongoing energy projects, such as a number of rural electricity access programs where it’s extending the power grid to rural areas of the country and improving power transmission throughout the country.
The Bank in its CPS document stated that it plans to finance the 422MW Halele Werabessa Hydro power project, in addition to an unspecified renewable energy project.
“WB can’t be everywhere so we have to be selective in the areas where we can see we can bring added value, competitive advantage and financing with knowledge in support of that,” said Chen, adding that the CPS program is set to cost one billion dollars annually during its four-year period.
Where is the Private Sector?
Nevertheless, the World Bank’s Country Partnership Strategy document which focuses on financing large government projects and doesn’t explicitly state or define the role of the private sector was a point of contention with Mulu Solomon, President of the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA), who queried the role of the private sector.
Tadesse Haile, state minister of the Ministry of Industry, said the CPS document envisages supporting the GTP with its focus on rapid, sustainable development which is bound to see the involvement of the private sector.
He further said the GTP’s vision of strong infrastructure development, macroeconomic stability and good governance are necessary conditions to create a good business environment where the private sector can thrive.
Dr. Eleni Gebremedhin, former Chief Executive Officer (CEO) of the Ethiopian Commodity Exchange (ECX), said while she appreciates a close alignment between the CPS and the GTP, she further stressed the need for an even closer alignment between academia, policy making and the private sector as central to the GTP.
In the same vein, she also stated the need for the formal creation of a business council to serve as a forum for dialogue with public-private partnerships and that the Ethiopian private sector needs to create strong Business-to-Business regional links and integration with the 120 million strong East African community (EAC) block as part of Ethiopia’s strategy to proceed beyond present electricity power exports and agricultural-based trading into other sectors.
The EAC is a block consisting of five east African nations which are Kenya, Uganda, Tanzania, Burundi and Rwanda created to facilitate social and economic integration across the region. 
However, she said if the private sector is to be an effective partner for the implementation of Ethiopia’s strategy, it needs to be immersed in the Information Communication Technology (ICT) revolution which she didn’t see stated in the CPS document, and mentioned, mobile phone-based financial transactions as well. 
Chen countered the query by explaining that the CPS program is designed to address entrepreneurship, with a Micro Financing scheme for Small and Micro Enterprises (SMEs) coordinated with the Ministry of Construction and urban Development (MoCUD), with a view to developing skills and marketing chains for the enterprises. He also said the World Bank is currently discussing with the Ministry of Industry (MoI) on diverse issues such as climate change and industry zones.
The International Finance Corporation (IFC), the private sector arm of the World Bank, currently has a modest financing portfolio of USD 90 million, but it says it plans to expand across the African continent with its advisory services in addition to the investment services it gives.
Is the CSOs law an obstacle? Are issues of disability and population growth ignored?
One sensitive issue raised was the legislation passed by the Ethiopian government several years ago severely limiting the foreign financing options of local Civil Society Organizations (CSOs) engaged in politics-related advocacy work.
Hailemariam Moges, a representative of a local NGO called Alliance for Development, said the WB’s Provision of Basic Services (PBS), while being an important tool for development to improve basic services using local NGOs as a development partner, the Civil Societies and Charities Proclamation was an obstacle that makes expenditure of such funds by local NGOs very difficult. 
Ahmed Shide, State minister of Finance and Economic Development (MoFED), responded by stating that the issue of social accountability has not been affected by the CSO law, with extra exemption provided under the law at local level for those engaged in social activities.
With regards to a question raised about population growth pressures vis-a-vis sustainable growth, Ahmed said the Ethiopian government will not follow the East Asian model, a subtle reference to China’s controversial one-child policy, and would rather follow an educational path, such as more education for women, as a way to control population growth. Birth rates are already trending downwards in urban areas.                             
Chen, affirming Ahmed’s statement, said World Bank programs affect various issues indirectly, such as the Profesional Basic Service (PBS), which deals with issues around population growth and the Productive Safety Net Program (PSNP), which addresses the needs of many vulnerable groups including disabled people.
“No external Financing for GRD, rail projects”
One eye-raising issue brought up by Girma Seifu, the lone opposition member of the Ethiopian Parliament, was the issue of financing the Grand Renaissance Dam (GRD) by the WB, which the bank reportedly had said erodes domestic financial capacity, as well as financial support for Ethiopia’s extensive rail projects.
Ahmed fired back, saying the GRD project has created a sense of national ownership among Ethiopian citizens, and he said financing is not a bottleneck as Ethiopia has boosted its domestic financing schemes, and as such, the government plans to finance this flagship project exclusively from domestic resources.
He said, regarding rail projects, for now there are several bilateral and multilateral financial partners for these endeavors; but, he indicated that the government hasn’t yet made a decision to ask the WB to chip in with financing.
“Eth. Gov’t to blame for underdevelopment not WB” 
However, the discussion on World Bank’s involvement in Ethiopia for more than six and half decades since its inception back in 1945, was itself a point of debate, with one participant asking whether its activities have been of any significant good to Ethiopia.  He said that he believed Ethiopia needs its own Marshal Plan, similar to what Europe had after the end of the World War II in Europe.
Ahmed strongly disagreed on this point, saying development is a fundamentally local choice, and the Bank can only act in a supporting role.
“Development is a local choice, not a miracle to be imported from the outside,” Ahmed said, adding that the government is also addressing the issue of inflation that so often accompanies development, concentrating on boosting its agricultural production, beefing up the country’s reserves and, since last year, halting borrowing from the National Bank of Ethiopia, to arrest inflationary pressures.
Tadesse, agreeing with Ahmed’s statement, said that Ethiopia’s past history and the various economic and political systems it went through should be looked into to explain its present situation.
Tadesse went ahead and stated that, in order to develop there has to be a strong base, with Ethiopia’s industries picking up the pace and with the government creating an enabling environment for this to happen. To do that, he said the WB’s assistance in the field of human resource development and the provision of power and Infrastructure is welcome.
Dr. Eleni on her part commented on the WB’s involvement in Ethiopia and developing countries in general, saying it is an institution which has been evolving over the years with its policies like the “Neo-Liberal” economic framework called the “Washington Consensus.”
“WB used to support agricultural development in Ethiopia in the 1970s, and after a long hiatus started supporting it recently, showing its ideological evolvement,” Eleni said, adding that she believes the creation of a National Business Council of Economic Advisors outside of the government could be a starting point.
Melanie Robinson, Head of the Department for International Development (DFID), the United Kingdom’s development arm, stated her conviction that the country’s growth is up to its people and the government of Ethiopia, and as such, the role of vibrant Civil Society Organizations (CSOs) and the private sector is very essential. 
At the meeting, several other World Bank documents were distributed; chief among them being the WB International Development strategy and a document on the development partnership strategy for Ethiopia, which interestingly states that leading to the upcoming 2015 National elections in Ethiopia, the government’s GTP plan could run into difficulties.