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These days, it is possible to listen to people discussing about the potential consequences of foreign investors in the banking industry following a draft proposal accepted by the Ethiopian Council of Ministers. One can come across business people, bank employees and others chatting and trying to make sense of the cons and pros, especially what there is for them of this first stage financial market opening. However, partly due to lack of detailed information and partly due to peoples’ tendency to see things in general terms, it is rare to find people with first-hand knowledge of the opening of the Ethiopian financial market to foreign investors. Factors like the degree of ownership, the number of branches they can open (if any), the type of financial services they provide, the nature of capital mobilization, more importantly the mode of factor payment (say in the form of dividend or expat salary) and the manners in which they will transfer best practices and technology-all these are important to know how much the Ethiopian economy benefits from this opening. At the same time the appetite of foreign investors is affected by how the regulatory framework addresses the above and related concerns. Though the immediate opening of the banking sector seems very limited, with the hope that the Ethiopian economy will soon experience a full-fledged financial liberalization (development and opening of forex market, equity market, security market and other sorts of financial markets), this article presents some of the views surrounding financial market liberalization. There is no question on the ever- increasing attractiveness of the Ethiopian economy to foreign investors, especially the service sector such as financing due to high rate of return, high proportion of youth population (hence, a growing market), the inevitable rise of a considerable middle class, more importantly the untapped financial potential due to limited access of financial services and to lack of various types of financial markets. Now let’s see about three perspectives about economic liberalization, especially the financial one while keeping in mind the opening of the Ethiopian banking sectors to foreign investors.
The debate on economic liberalization in developing countries which encompasses other related processes such as privatization and deregulation goes as far back, at least, to the 1980s. There has been fierce resistance at the intellectual and policy making level given that domestic private sectors were undeveloped as a result unbale to take over and efficiently run previously public owned businesses. Besides, the opening of the developing economies to foreign multinationals was (is still in some sectors and in many countries about four decades later) considered problematic since they are too big to compete with and too complex to be monitored by low-income countries’ existing institutional frameworks. In developing countries (when will they finish their development?) opening up the economy as a whole, especially opening institutions such as banks to foreign investors are seen in relation to political, security, and economic sovereignty (national interest) lenses. There are those who say that only the power of domestic financial institutions can slowly but sustainably help grow the economy. Among their claims, they argue that foreign bank entry is often accompanied by frequent -(1) financial crises, (2) currency market crises, and (3) market instability and general economic chaos. (4) In addition, foreign banks provide loans to those businesses which are large and have relations with the outside world or whose products are tradeable while small companies (usually in the non- tradeable sector) may rarely benefit directly from foreign financial institutions. (5) They bring about a kind of “brain drain” by luring experts from local banks. Later, the profits are distributed to their shareholders(abroad). (6) And one more important line of argument is that even if foreign investors pump in foreign currency in to the local economy around their entrance, over time, they have to transfer back the returns to their shareholders in hard currency. One may ask “well! where is their benefit in terms of foreign currency, then?”. One way of addressing this question is that foreign investors help businesses flourish (become productive) and generate hard currency via exports. However, isolating their impact in this regard requires cautious research as there are always many moving pieces in an economy and we don’t easily know what causes what.
In stark contrast to these arguments, there are groups that advocate for free flow of goods, services and capital within countries as well as across borders with minimal government intervention. They argue that life would be better off if producers and consumers met voluntarily without government interference. Their thoughts related to whether banks should enter or not are fetched from the same line of reasoning. In their view, free trade is the only way to wealth and prosperity. They argue that the source of market-induced financial crises, market shocks and general economic chaos is government intervention, not the market itself. Wounds and illnesses caused by the free market itself are treated and healed by its antibodies (supply and demand). According to these ivory-tower elites, we should not trust nearly anything the government prescribes for the reason that the medicines it prescribes cause worse harm than the original disease. From their point of view, when foreign banks come in, what follows is (1) the financial sector develops, (2) a country’s economy will grow because credit and savings will expand, making trade easier and production sustainable. (3) As competition between financial institutions heats up, consumers benefit (savers get high interest rates, borrowers pay low interest rates) and inefficient and unprofitable banks exit from the market, so the loss of resources is reduced. Since businesses can freely move and compete, it will increase their profitability too. (5) When foreign investors come in, they bring not only foreign currency but also FDI follows them as there may be organizations that have ties to or trust them. Usually, proponents of such unbridled free trade do not take the various contextual difference say between Ethiopia and Germany or the US and India. For them, it doesn’t matter whether you practiced free trade (hence developed appropriate regulatory frameworks) for centuries or you got your independence about seventy years ago. Hidden in their argument is the naked truth that companies in their countries are big and have been in the game for a long time. Thus, they can beat any newly coming competitor be it at home or abroad.
The right way in this regard seems the middle way. Those who favor this approach say that it is possible to increase the blessings and reduce the burdens of opening up an economy by using appropriate institutional restraints so that unbridled capitalism cannot destroy an economy at the same time by encouraging competition which will help avoid institutional(economic) stagnation. If governments, in countries like Ethiopia, cautiously put in place appropriate institutional frameworks, opening up the financial sector may help bring about financial deepening, economic growth and development. And in the short term they may help alleviate foreign currency shortages.
To sum it up, like every other policy action, the coming in or lack thereof foreign investors to the banking sector of Ethiopia by itself cannot be good or bad. It is what we really do with this policy that matters and determines the net benefits of these measures.

The writer can be reached at etsubdink08@gmail.com

France commits to preparing a new program of preservation, restoration and development of Lalibela

Arts and Culture

October 23, 2022

The Ministry of Finance and the Agence Française de Développement (AFD) signed a 260 million birr grant agreement to conduct the preparatory phase of a program of Preservation and restoration of the churches of Lalibela, and of development of the city around its heritage jewel.
The UNESCO World Heritage Committee has requested the Ethiopian government to deliver additional studies and a comprehensive strategy to preserve and restore the site of the 11 churches of Lalibela. To support the Ethiopian government and the Ethiopian Cultural Heritage Authority (ECHA) in this endeavor, AFD is granting this additional support to the previous studies conducted in Lalibela from 2019 amounting 109 million Birr. It will moreover support the development of ECHA’s capacity and will enable the study of a complementary local development program for the city of Lalibela.
This support complements the financing of the immersive exhibition “Lalibela: Carving Faith”, currently presented in Entoto Fine Arts Center until the end of December, and of the “Sustainable Lalibela” project, implemented by the French Center for Scientific Research (CNRS), jointly with the Church of Lalibela and ECHA.
Lalibela site preservation, restoration and enhancement was a commitment that the French President
Macron took in March 2019 when he visited the site with PM Abiy.
“AFD demonstrates today its strong support to Ethiopian authorities and Lalibela communities to preserve and promote their unique heritage in Lalibela. Through this multiple support, we are not only trying to support the design of a long lasting solution for the preservation of this exceptional historical and cultural heritage. We also aim at contributing to the development of all actors’ capacities, in particular the Ethiopian Heritage authorities, and to the identification of further support to Lalibela communities and city to strengthen their economic and social development. France has a strong experience in using heritage as a lever for attractiveness and economic development and this multilayer cooperation can help Ethiopia to benefit from it”, said Valérie Tehio, AFD country director in Ethiopia.

AGE OF CONSEQUENCES

Editorial

October 23, 2022

Homo sapiens and its technology have become inseparable. At the beginning, the animal depended on very rudimentary means to withstand the vagaries of nature. Gradually, its discovery, creation and usage of technology resulted in securing its continuous survival, at least till now. Homo sapiens’ cunny manipulation of nature, via technology, allowed it to dominate all and sundry. The unison, i.e., between the never (almost) changing animal and the ever compounding tech, seems to have gone beyond manageable. In fact, role reversal between the two might well be in our future. AI (artificial intelligence) is one potentially realizable trajectory that might seal the arrival of the looming role reversal. The tech regime or the technosphere, operating over all aspects of collective existence, is causing incalculable damage, not only to the animal of interest, but also to the wider bio/ecosphere. Something has to yield!
In light of our current as well as very probable Frankenstein future, why has the dominant animal become so complacent? Allowing the non-biological self-perpetuating entity to dominate over the primacy of biological propagation, not only of our species’ but also other life forms cannot be a benign phenomenon. Given the continuous development of the technosphere, what will the future hold? These and other issues must be debated and deliberated upon, if human survival is to be desired and preferably assured. Admittedly, free and open discussions on such matters have not been encouraged by TPTB (The Power That Be), for the obvious reasons. But this discouragement by the dominant interests should not be taken as an excuse for not engaging, in whatever little space that prevails, on this critical issue, particularly by those inquisitive souls, as the subject is a matter of life death, literally speaking! Humanity’s infatuation about many of the temporal miracles of the technosphere must be deconstructed and interrogated in light of serious consequences that managed to erode the very life support system of our planet, to say nothing about very dysfunctional social configurations that might boil over to overwhelm harmonious existence between peoples of the planet. Consequences are already obvious and we cannot just look the other way!
Another inherently lopsided and irrational construct of the modern world system that has been facilitated by the technosphere is the modern economy. On this front, humanity is also on the verge of collapse. The underlying narrative of the economistic modern world system is; economic growth can go on forever across the breadth and width of the globe! ‘Limit to growth’, due to, amongst other things, shortage of resources, hardly figured in the calculus of growth has not been taken into consideration in the prevailing capitalist modernity. To a large extent, capitalist modernity, which is the prevailing socio-economic construct, is the byproduct of the increasingly unwieldy and cumulative technosphere! Today, growth in the technosphere has become tantamount to growth in the economy. As limit to growth has always been anathema to the moronic thinking of the prevailing modern world system, always buttressed by the celebrated interstate system of rigid political configuration, efforts to thwart off alternative socio-economic formations, are only expected to increase. Here again consequences are already visible. Polarization on the world scale, leading to mass exodus to presumed greener pastures, massive pauperization within the confines of the nation states, are all indicatives of consequences. As former Federal Reserve Chair Janet Yellen noted; ‘It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority.’
Trying to deconstruct the cumulative impact of the technosphere on the human animal, particularly in the realm of the psychology, culture, religion, relations, etc., has not been a welcomed thread of enquiry, even in academia. This subject has been generally slanted, even by independent and severe critics of the world system, save the few Avant guards like Marcuse, et al. Classical psychoanalysis as well as modern psychiatry tend to place the blame on the flimsy and weak individual, who hardly has any say in the scheme of things. The blatantly irrational modernist regime, i.e., the technosphere that has been subjecting collective humanity to its lifeless whim for decades has been spared the blame. For the most part, the implied verdict of modern psychiatry goes more or less like this; it is the individual that is sick and not the larger society! Such intentionally biased conclusions also have consequences; intensely subjected to the logic of the technosphere, increasing number of victims are resorting to all sorts of drugs/opioids, legal or otherwise, to find relative solace.

Rejuvenating ETHIOPOST

Interview

Metasebia Teshome

October 23, 2022

Ethiopost for the past couple of years has been implementing various reform activities aimed at modernizing processes, optimizing its operations, and providing customers with reliable, effective and affordable services. The reform activities entail restructuring the institutional setup, minimizing cost and diversifying services. In collaboration with the Universal Postal Union, Ethiopost is working to leverage its extensive experience in the mail and logistics sector to support e-commerce initiatives in Ethiopia.
As part of the reform process, the name of the organization has been changed from ‘Ethiopian Postal Service Enterprise’ to ‘Ethiopost’ in 2019.
As Ethiopost strives to become a continental leader in postal service and meaningfully contribute to the sustainable development in the country; Capital’s Metasebia Teshome reached out to Hanna Arayaselassie, Chief Executive Officer of Ethiopost, for insights of remarkable strides made by the Post. Excerpts;

Capital: It has been 2 years and 7 months since your appointment to this post. What have been the challenges and turn-around registered whilst your firm has provided its services?

Hanna Arayaselassie: Before my introduction to my current role, Ethiopost had been facing a challenging time and was not in the best financial status, quality of operation and so on. At the end of the 2019/20 budget year we were at the back of a 78 million birr loss and it was really difficult to pay the salary of our 2000 plus employees.
The Ethiopost team, going into the 2020/21 fiscal year worked to start over from scratch and to work round the clock. We did this by re-organizing the management team, changing our operation style, collecting the overall assets of the company and making it operational.
Likewise for the 2021/22 fiscal year, we worked relentlessly by focusing on improving all our service quality. A testament to our progress was the shift in financial results.
If we compare 2019/20 and 2020/21 within only one year, we have been able to decrease 86 percent of our expense and increase income we got to 72 million birr in profit. Similarly, in 2021/22 we had a 50 percent increment on our revenue and we registered 187 million birr in profit; which is 117 percent greater than the previous year. This was as a result of strengthening and increasing our service volume.
For this fiscal year, we are targeting profits of 300million before tax, and we are working accordingly to achieve that.

Capital: What focus areas have led you to register such marvelous results?

Hanna Arayaselassie: Our reforms are focused on 4 main areas. The first one is improving the company’s financial status and finding ways to increase its income whilst decreasing our expenses.
The other focus area is improving and providing quality services. We have different services including the mail service which has different classified services such as letter and government file delivery, and package delivery. Ethiopost delivers packages to over 120 countries and over 700 domestic destinations and customers can send up to 31 kilograms in one package. We also have an Express Mail Service /EMS/ to which we provide fast shipment delivery to 120 international destinations.
Additionally, we give logistical services. We work on transporting biological samples and laboratory reagents and test results. As part of our company’s commitment to making financial services accessible to everyone, we provide bulk payment services for organizations and businesses fee collection. We have post shop for manufacturers or importers to sell their products at our outlets throughout the country.
Our Postal Museum and Philately houses over 4000 stamps and historic tools and objects that will take you back to the early days of Ethiopia and Ethiopost, as early as 1894.
We are also focusing on improving the quality of these services by assessing gaps, and by re-designing to improve safety and speed of our services.
Two years ago, it could take about 7 days for package deliveries to reach its destination while now it is less than two days time. Similarly, for the EMS, we have managed to cut the delivery time from 4 days to less than a day.
It is also worth noting that Ethiopost takes major share in the sector when compared to other companies in our country.
We have always been solution oriented in our approach, and we often looks for gaps to assess and find the necessary solutions. We are also a member of the Universal Post Union (UPU) which makes it easy for us to improve our services.
For the past few years, we have been in the least rank at the UPU. However in recent years, the narrative has changed as we have recorded improvements in the last two to three years.
In 2020, we were ranked 84th and following our improvements in 2021 Ethiopost was ranked 78th. In the latest 2022 rank, we were 68 and our EMS service, which is the major source of our revenue, ranked 6th best in service in 2022.
For a while our company had disappeared from the public eye, but we have since then rejuvenated and rebranded including; our branches, customer service and marketing strategy, changing the old annual operation to digital, being transparent and accountable in our ways; doing these will assure financial stability of the company for years to come.
Even though Ethiopost is a governmental enterprise, it is a company which is supposed to be profitable and become financially strong to cover all its expenses for this it has to be led with a profitable business mindset.

Capital: Currently most of government development enterprises are under Ethiopian Investment Holding. Why has the Post not been included thus far?

Hanna Arayaselassie: Our alignment and responsibility calling is the decision of the government. Currently, we are under the Public Enterprise Holding Administration. Nevertheless, we will continue to do all our duties and responsibilities to serve the company.

Capital: As the coming era of digitalization there is decrease in demand of postal service in the whole world, how does this affect you?

Hanna Arayaselassie: In my point of view there is a misconception that digitization has decreased relevance of postal services. This is far from the case. The services and demand of postal services is increasing rather than decreasing. Most of postal service providers in the world are 100 years older, and have passed through a lot of challenges and changes, but what makes the postal service stick is resilience.
Even though the volume of letters and its contribution to the revenue has decreased, the volume of other operations and services is increasing from time to time. In 2022, Universal Postal Services operating revenue capped at 1.2 trillion dollars. Currently, there are about 618,000 postal service operators in the world creating employment opportunities for more than 5 million people.
Despite the volume of letters decreasing by 15 percent after the outbreak of Covid, the volume of parcel postal services has increased by three fold and that’s why we say the nature of postal service is flexible.
When it comes to Ethiopost, for us to manage these global challenges we have developed and have started implementing a three year strategy which sums up our services through the words: Deepening and Diversifying.
When we say ‘Deepening’, we have more than 700 branches yet it is still not enough to reach all the population. So we have planned to expand our branches including by partnering with companies as an agency. We have also restructured to strengthen our IT infrastructure, HR management and man power to compete with other companies.
And in ‘Diversifying’, we have planned to expand and introduce new services that can go with global changes. We are focusing on three main models; one is ‘Logistics and Ecommerce’- which is highly increasing from time to time especially after the outbreak of the pandemic. This is also part of government’s strategy to digital Ethiopia 2030. We are now testing our operational readiness, building digital and payment system; it can be from Ethiopia to abroad or to Ethiopia within Ethiopia and also we also want to have a transit ecommerce service. We are working with the World Bank and we are expecting it to be a major source of revenue. We have also planned to increase our governmental services in collaboration with government organizations as part of expanding E-governance.
And lastly we are increasing our performance in the financial sector, since Posta plays a big role in the financial sectors across the globe. However, except bulk payment, in our country this role has got low, because of not moving timely with modern techniques. Thus we are working to modernize and change that.

Capital: How do you plan to join the financial sector?

Hanna Arayaselassie: We have been evaluating various ways on indulging in the financial sector. Establishing a Posta Bank is one viable option as such banks in countries such as France and Japan are huge state owned cooperation. But here in Ethiopia, the Commercial Bank is the largest state owned bank, thus from our assessment we don’t find it necessary and profitable to establish the bank as its duplicating a bank (CBE) which is already existing and doing well. Mobile money is however very lucrative and we are keenly looking into that.

Capital: How do you prepare to achieve all your plans?

Hanna Arayaselassie: We have carried out extensive and comprehensive preparations for our five and ten year’s strategy. However it is worth noting that we have achieved targets beyond our current strategy. For example we set plans to generate 1.5 billion birr in revenue this year because of great achievements being realized. However, initially this was our target for the 202e/25 fiscal year. We are fast tracking our goals by working round the clock. In the coming year, we will start implementing this strategy.

Capital: Do you think the revenue goals will be possible with the current status of the company?

Hanna Arayaselassie: Despite it looking ambitious on paper, I believe we can achieve it. As Ethiopost we have centered ourselves by working on our team spirit which is the major engine in the achievement of any plan. Even when we assess the performance of the first quarter, great achievements have be noted on both revenue and profit.
Of course we have to sharpen our IT and infrastructure, to which we are working aggressively on.

Capital: It’s been a long time since we have seen new stamps. Why is that?

Hanna Arayaselassie: We have lagged a little bit behind with regards to publishing stamps. Previously, we used to publish 4 or 5 stamps per year but starting from 2016 until 2021 we didn’t publish any new stamps. In 2021, in memory of the 50th year of Ethio-China relations we published 1 stamp. Last year we have been planning to publish two stamps but one of the major setbacks we faced was foreign currency and lack of quality local printers which derailed our publishing.
On March 2024, Ethio post will mark its 130 years anniversary and up until then we have plans to publish 5 to 10 stamps.

Capital: Do you think privatization is an option for better operations of the post?

Hanna Arayaselassie: Some countries have privatized their Postal service operator. In my opinion when it comes to our condition before thinking about privatization we have to be sure all government enterprises are properly being managed as a business entity. In terms of results or profits, changes in ownership do not bring significant change; change is brought about by working responsibly with accountably and transparency.

Capital: What kind of policy changes are you expecting?

Hanna Arayaselassie: We expect Posta regulations to be changed as there is no legal frame work which governs the postal sector not only Ethiopia’s Posta but also all the couriers in the sector. The last Posta regulation was adopted in 1966 at the time the only operator in the country was Ethiopia Posta but now there are more than 80 couriers.
So there should be clarification of mandates between us and other couriers.
When other couriers focus on only profitable areas, we work on government obligations too without profit. About 80 percent of our branches worked through losses just to be accessible to the public. In other countries there is a so called universal service fund, the entire courier in this sector contribute to finance the designated operator. Due to lack of this, Ethiopost has no other revenue sources. This can’t be sustainable and has impact on us. Ethiopian Communication Authority is the one handling the preparation and we expect it to be finalized before the end of this year.
The other regulation we are expecting is revision of Ethiopia Posta establishment regulation which was amended in 2009 which is needed to expand all our planned new services. We are currently contributing our inputs on this.
The other one is that Posta code Ethiopia doesn’t have digital postal codes. Thus the Ethiopia Space Science and Geospatial Institute is working on digital address codes. This will also simplify our delivery service.

Capital: It’s been a while since Posta buses stopped their cross country operation. Is there a plan to restore it?

Hanna Arayaselassie: It was stopped when the buses got old. Now, we are planning to restore this service by giving all the necessary maintenance to the buses soon. Additionally we have plans to purchase new buses in the current fiscal year.
Capital: When will you start Ecommerce?
Hanna: This month we have started our transit ecommerce service on packages coming from China to African countries and on outgoing Ecommerce. Slowly we will expand and increase the volume.