I am one of those who believe that responsible ownership enhances economic performance. I believe that the assignment of property rights is an important step in promoting a higher standard of living for any country’s citizenry. I also believe that government has to do much more than a pure laissez faire approach would allow for expanding ownership in general.
Land policy in Ethiopia, for example, is one area that needs revisiting as current land laws fail to provide incentives for developing land and increasing production of agricultural commodities.
Ethiopians have a deep notion, rooted in their feelings and their minds, that land is everything. They are so attached to the little plot of land they own as a community member, they worry of any policy that would alter the current system, even if the latter works far better.
Here is one good challenge for the government – to work on reforms that will allow the ownership of hundred of thousands of farmland and urban land to Ethiopians.
Why?
Three reasons:
First, the current system has failed to provide incentives for developing land and increasing production of agricultural commodities. Caution however, is in order not to foster more corruption or entice new oligarchs.
Second, land reform if properly carried out, would widen the opportunities for social and occupational mobility, and facilitate efficiency gains by reallocating land to more efficient users via land markets.
Third, secure tenure rights can boost long-term land-related investment through assurances that returns on investment will not be appropriated.
There are of course other reasons.
Still, Ethiopia should not privatize everything, and it should not distribute property to everybody. The government should still reserve the right to regain the ownership to the land in the event of waste. This system allows the state to designate the use of land for specific purposes pursuant to public policy, while also giving the owners a broad system of powers to possess, use, manage and control the land. The government must maintain the discretion to choose which land to privatize and who will receive it, thereby limiting the scope of privatization.
Assuming the new government can muster the necessary political will for actual implementation of land reforms, such initiative works only if there is a much larger and comprehensive package of agrarian reforms, if there is renewed public investment in agriculture focusing on reviving sustainable technologies for smallholding rain-fed farming, income protection and support to farmers and rural credit, among other measures. Unfortunately there is no sign whatsoever of any such public priority with the current administration.
Privatization is an inherently controversial issue that will generate considerable public and political debate. And yes much thinking in reenergizing the economy is in order, Standing Committee reports and public debates are a must. The PM will need to take decisions on these.
Current economic changes, political instability, absence of clear legal doctrines and regulations, corruption and bureaucracy demand implementation of a clear and coherent policy.
As I pointed out government must control the land allocation process and designate the subsequent use of the land. It should play an administrative role in this process. Before any privatization can occur however, a complete legislative package must be introduced or overhauled, covering banking law, commercial law, bankruptcy law, real estate finance law, tax law, labor law, and administrative law. Furthermore, the law regarding ownership of property must be revised before privatization is launched.
In this day and age, economic governance demands flexible laws that cannot only guarantee an owner sufficient powers to effectively realize his interest in the property, but also give society the legal means to control the distribution of this power according to general principles of fairness, equity, and the public interest.
Dear Reader, this is the first out of the six reforms I believe should be considered by the new administration. Five to go!
Land reforms – Keeping a 21st century Ethiopia in mind
Skills Initiative
Skills Initiative for Africa (SIFA) launches a program designed to address skills development and youth employment in Ethiopia during an event held for two days from July 10 at Ethiopian Skylight Hotel.
The SIFA Financing Facility launches a call for proposals under Funding Window I for large skills development investment projects proposed by Ethiopian TVET entities in partnership with private sector companies. The Grant amount per project under this Funding Window is up to 3 million euros.
SIFA is an initiative of the African Union Commission (AUC) and the African Union Development Agency- NEPAD (AUDA-NEPAD) supported by the German Government to strengthen occupational prospects of young people in Africa. Under SIFA, AUDA-NEPAD and KfW support a Financing Facility for Skills Development to provide funding on a competitive basis for the implementation of innovative and sustainable skills development initiatives. The second pillar of SIFA is a technical assistance program supported by GIZ to strengthen private sector engagement. SIFA aims to foster the employment and entrepreneurship of youth, women and vulnerable groups including refugees, migrants and internally displaced persons, the disadvantaged and disabled.
The SIFA Financing Facility for Skills Development addresses the common challenges in skills development in Africa by upscaling and/or disseminating local best practices and supporting innovative and sustainable approaches.
Ethiopia has been selected as one of the eight participating countries in SIFA. The others are Cameroon, Ghana, Kenya, Nigeria, South Africa, Togo and Tunisia.
One way of tackling youth unemployment in Ethiopia is investing heavily in vocational and technical education and training (TVET).
Funding Window I can fund a combination of the following 5 technical and didactical interventions.
Convention bureau to target international conventions
Ethiopia wants to bring more international events to the country so it is opening a national tourism convention bureau.
The government is working with tourism consultant Rick Taylor to open the bureau in Addis Ababa. According to a source at the Ministry of Culture and Tourism, they are talking with a consultant who served as Chief Executive Officer of Cape Metropolitan Tourism and the Cape Town Convention Bureau for seven years and later as Head of the National Convention Bureau for South African Tourism to consult on the project.
The bureau will represent Ethiopia when submitting proposal bids to host international events. It will also collect and publicize information about tourism. It will also promote tourism in Ethiopia and show all the country has to offer when it comes to business conventions.
“The problem is we don’t have an institution seeking out international events to be held in Ethiopia like, the Rwandans, Kenyans and South Africans. The government is going to learn how to develop one and likely open the bureau within the next two years,” a source told Capital.
This could lead to generating millions of dollars, the source says.
“Let’s give you a simple example. If we call one international meeting that has at least 1,000 people attending, they will come for the meetings, take our airlines, rest in the hotel rooms, visit historical places, take taxies and go to the shops to buy things. We can earn at least 50 million birr with one event.’’
Kumneger Teketel, Managing Director and Lead Consultant of OZZIE Business & Hospitality Consultancy and International Events Company who has been suggesting the government open the national convention bureau for the last four years said the opening will bring good results to the national tourism and hospitality industry.
“I strongly recommend establishing the National Convention Bureau and having it led by high level professionals,” he said.
Exporters increasingly in default
Ethiopia has seen the volume and income from its exports decrease. Now the country is also experiencing contractual agreements being breached between exporters and those purchasing contracts from abroad. The Ministry of Trade and Industry reported 24 contracts in default last fiscal year. Some exporters claim that figure could actually be around 100 if the matter was studied more closely.
Most of the defaulted contracts involve cattle, pulses and sesame seeds and a majority of those on the receiving end are located in Saudi Arabia, India and Dubai.
There are 13 Ethiopian exporters who did not send agricultural products to places like Egypt, Israel, Oman, India, Singapore and Saudi Arabia as they promised.
Exporters say importers, import agents and bankers have defaulted, renegotiated, confirmed orders or even cancelled shipments and letters of credit or contracts without reason.
Prices have risen as a result of instability and scraping high-value currency notes which disrupts trading in the cash-oriented market.
Out of concern the Ministry is preparing a regulation about the issue. Haimanot Tibebu, Export, Research and Promotion Director at the Ministry told Capital that the draft regulation will decrease defaults.
“The problem is that some exporters are reluctant to fulfil agreements with receivers in destination countries. Some rely on the advance payments from the receivers but the receivers don’t want to pay until they get the product.” She went on to say that these defaults undermine Ethiopia’s credibility in the world and that the regulation is needed.
One exporter who did not give their name said contractual defaults occur primarily because of the high prices at the Ethiopia Commodity Exchange (ECX).
“Exporters are buying at high prices set everyday at ECX, they often lose money but compensate for this by importing other products with the hard currency they get from exporting. Then others are forced to breach the contracts they made with importers abroad because they can’t make profits on ECX prices. So the best solution is to drop the ECX transaction and to set the price based on buyer and supplier demand.”
In the past six months Ethiopia’s export revenue was 1.21 billion USD which was 750 million USD short of the government’s goal of USD 1.96 billion. Current challenges to Ethiopia’s exports come from instability, failure to increase productivity, reliance on raw agricultural commodities, contraband border trade and lack of meaningful diversification of export items in addition to lack of inputs for manufacturing companies due to the shortage of hard currency. Ethiopia’s major exports include coffee, oil seeds such as sesame, flower, Khat, fruits, vegetables, minerals and some manufactured goods. Ethiopia’s forex consuming import products include fuel, machines, medicines, steel, manufactured goods, foods and simple products such as, toothpicks, candies and cookies.
