The National Bank of Ethiopia’s (NBE) first quarter bulletin for 2018/19 budget year indicated that at the end of first quarter of 2018/19, reserve money reached 174.8 billion birr, depicting 15 percent growth over last year’s same quarter.
Component wise, both currencies in circulation and bank deposits at NBE rose by 16.8 and 12.1 percent, respectively. This is almost similar to the preceding quarter which ended in June. The report indicated that the currencies in circulation in September 2017 were 94.9 billion which stood at 112.9 billion birr in June last year while the dropped to 110.8 at the first quarter of the fiscal year, which is at the end of September 2018. Despite the Bank’s deposits at NBE has increased in September compared with June 2018. The report shows that in September Banks’ deposits at NBE were 63.9 billion which were 4.4 percent increase compared with 61.2 billion birr in June 2018.
The quarterly bulletin stated that net foreign assets of the NBE declined by USD 283.9 million, while that of commercial banks increased by USD 214.9 million. Thus, gross international reserves as of September 30, 2018 were sufficient to cover 2.6 months of payments for import of goods and non- factor services for next fiscal year.
According to the report the number of bank branches has reached 4,986 by adding 229 new ones. Based on the number of branches one branch on average serves 19,788.41 people. Of the total bank branches, about 34.6 percent were located in Addis Ababa. The share of public banks in total bank branches was 30.6 percent while that of private banks stood at 69.4 percent.
At the end of first quarter of 2018/19, the total capital of the banking system reached 89 billion birr, depicting 11 percent annual growth. Of the total capital, private banks accounted for 39.8 percent while that of the Commercial Bank of Ethiopia and the Development Bank of Ethiopia were 51.5 percent and 8.7 percent, respectively, thereby putting the total capital share of the two public banks at 60.2 percent.
Meanwhile, the banking sector disbursed about 30.1 billion birr in new loans, registering a 31.8 percent annual increase. Of the total new loans disbursement, the share of public banks was 44.2 percent and that of private banks 55.8 percent. The major beneficiary of bank loans was industry accounting for 28.8 percent followed by domestic trade (18.3 percent), international trade (14.6 percent), and construction (12.9 percent), and agriculture (10 percent).
In the meantime, the loan collection of the banking sector reached 29.6 billion birr, about 24.4 percent higher than last year same period. Total outstanding credit of the banking system (excluding credit to government) increased to 405.7 billion birr, showing 22.9 percent annual growth. About 99.8 percent of the private banks and 48.1 percent of public banks’ loans went to finance the private sector.
During the first quarter of 2018/19, total merchandise export earnings (including electricity) amounted to USD 628 million depicting a 7.4 percent decline compared with the same quarter of last year. This was due to lower earnings from export of coffee (5.2 percent), oilseeds (22.4 percent), pulses (5.3 percent), fruits & vegetables (5.1), flower (2.9 percent), gold (45.2 percent), live-animals (51.4 percent) and electricity (25.2 percent). “The slowdown in export revenue was attributed to lower export volume, prices or both” it explained. The contraband activity in relation to gold and live animals has been a major challenge for the year. The report shows that the drop in percentage for the two export products is significant compared with the preceding year.
In the meantime, total merchandise import bills declined 8.7 percent to USD 3.7 billion compared with the same quarter last year on account of lower imported capital goods (20.4 percent), consumer (6.1 percent), semi-finished (22,5 percent) and miscellaneous goods (30.5 percent).
In contrast, the values of imported fuel surged 43.7 percent and that of raw materials 60.7 percent. As a point of reference for international oil price, the average price of Brent crude oil increased by 46 percent and reached USD 75.5 per barrel during the first quarter of 2018/19 vis-à-vis USD 51.7 a year ago.
During the first quarter of 2018/19, total transfer receipts increased by 7.4 percent to about USD 1.8 billion. This growth was attributed to an 11.7 percent increase in private transfers. Private individual transfers rose by 28.9 percent whereas NGO transfers declined by 51.7 percent. Hence, the current account balance (including official transfers) registered USD 1.04 billion in deficits during the first quarter of 2018/19, compared with USD 1.6 billion in deficits a year ago.
In contrast, capital account surplus reached USD 963.3 million about, 27.7 percent lower than last year’s same period. This performance was attributed to a (68.1 percent) slowdown in net official long term capital and 23 percent in FDI inflows.
As a result, the overall balance of payments recorded USD 69.1 million deficits compared to the USD 321 million deficit registered a year earlier.
At the end of September 2018, total deposit liabilities of the banking system reached 750.4 billion birr, indicating a 25.3 percent annual growth, which signified strong expansion of bank branches and improved access to finance, growing saving culture of the society and an increase in per capita income, according to the report.
Demand deposits accounted for 35.2 percent of total deposits and reached 264.3 billion birr showing a 17.1 percent annual growth. Similarly, saving deposits went up 32.7 percent and its share in total deposits reached 54.3 percent. Time deposits, which constituted 10.5 percent of the total deposit liabilities, increased 19.4 percent over the same period of last year. The share of public banks in total deposits outstanding was 61.3 percent and that of private banks 38.7 percent.
Total outstanding borrowing of the banking system stood at 66.4 billion birr, showing a 64 percent annual increase. Of the total borrowing, 58.2billion birr (88 percent) was from domestic and 8.1 billion birr (12 percent) from external sources.
During the review quarter, banks disbursed 30 billion birr in fresh loans, showing a 31.8 percent year-on-year growth. Of the total new loans disbursed, public banks accounted for 44.2 percent and private banks 55.8 percent.
The major beneficiary of bank loans was industry which took 8.6 billion birr (28.8 percent) followed by domestic trade (5.5 billion birr or 18.3 percent), international trade (4.4 billion birr or 14.6 percent), housing and construction (3.9 billion birr or 12.9 percent), and agriculture (3 billion birr or 10 percent). The remaining share was taken up by other economic sectors.
During the first quarter of 2018/19, a total of 544 investment projects having investment capital of 5.9 billion birr became operational. Both the number of investment projects and investment capital grew by a significant percentage over the previous year’s same period, though they declined by 22 and 54.7 percent, respectively compared with the previous quarter. The foreign investment comprised 199.2 million birr (3.4 percent).
NBE reserves grow by 15%
Ethiopia ranked 118 out of 126 countries on rule of law
The World Justice Project (WJP) released the WJP Rule of Law Index 2019, an evaluation of rule of law adherence worldwide based on more than 120,000 household and 3,800 expert surveys in 126 countries.
Featuring current, original data, the WJP Rule of Law Index measures countries’ rule of law performance across eight factors: Constraints on Government Powers, Absence of Corruption, Open Government, Fundamental Rights, Order and Security, Regulatory Enforcement, Civil Justice, and Criminal Justice.
Ethiopia’s overall rule of law score places it at 27 out of 30 countries in the Sub-Saharan African region, 18 out of 20 among low income countries, and 118 out of 126 countries and jurisdictions worldwide. Significant trends included an improvement in “Order and Security.”
The top three overall performers in the WJP Rule of Law Index 2019 were Denmark, Norway, and Finland; the bottom three were the Democratic Republic of the Congo, Cambodia, and Venezuela.
Globally, the new WJP Rule of Law Index scores show that more countries declined than improved in overall rule of law performance for a second year in a row, continuing a negative slide toward weaker rule of law around the world. In a sign suggesting rising authoritarianism, the factor score for “Constraints on Government Powers” declined in more countries than any other factor worldwide over the last year (61 countries declined, 23 stayed the same, 29 improved).
“This slide in rule of law in general and checks on government powers in particular is deeply concerning,” said Elizabeth Andersen, executive director of the World Justice Project.
Regionally, Sub-Saharan Africa’s top performer in the Index is Namibia, 34th out of 126 countries globally, followed by Mauritius and Rwanda. The three countries with the lowest scores in the region were Cameroon, Mauritania, and the Democratic Republic of the Congo.
The WJP Rule of Law Index is the world’s leading source for original data on the rule of law. The Index relies on more than 120,000 household and 3,800 expert surveys to measure how the rule of law is experienced and perceived in practical, everyday situations by the general public worldwide. Performance is measured using 44 indicators across eight primary rule of law factors, each of which is scored and ranked globally and against regional and income peers: Constraints on Government Powers, Absence of Corruption, Open Government, Fundamental Rights, Order and Security, Regulatory Enforcement, Civil Justice, and Criminal Justice.
“Effective rule of law is the foundation for communities of justice, opportunity, and peace,” said William H. Neukom, WJP founder and CEO. “No country has achieved a perfect realization of the rule of law. The WJP Rule of Law Index is intended to be a first step in setting benchmarks, informing reforms, stimulating programs, and deepening appreciation and understanding for the foundational importance of the rule of law.”
Teff patent faces further legal fight
New team emerges to assist the Teff battle technically
The Teff patent’s controversial path began on March 26, 2003 when a Memorandum of Understanding (MoU) was signed. It was named “Teff Research and Development of International Markets for Teff-based Products” between the Ethiopian Agricultural Research Organization (EARO), Larenstein Transfer and Soil and Crop Improvements (S&C), which was a precursor to HPFI.
After two years of negotiations the final agreement was signed on April 2005 named “Access to and Benefit Sharing from Teff Genetic Resources”. The Ethiopian Institute of Biodiversity Conservation (IBC) and the Dutch company Health and Performance Food International (HPFI) was marked as signatories.
Meanwhile, the two affiliated companies filed a patent in two different offices. The S&C, which was the precursor of the HPFI, filed the patent rights on the processing of Teff flour and related products in the Netherlands in July 2003 and extend the application to the European Patent Office (EPO) in July 2004 by HPFI. The later obtained the right in 2007 from the EPO.
Based on this MoU, 1440 kg of Teff seeds were sent from Ethiopia to the Netherlands for research and development purposes. From 12 specified Teff varieties, 120 kg each was given for the use of Teff.
The final agreement provided the HPFI with access to the right to use the Teff varieties agreed to be utilized to produce food and beverage products except those which are already traditional in Ethiopia.
The agreement also set benefits for Ethiopia including royalties’ shares, license fees, profit sharing, research cooperation, and research result sharing. The HPFI was also obliged to recognize Ethiopia as the origin of Teff genetic resources.
Teff which is scientifically named “Eragrostis tef” is becoming one of the known health foods in the western world. Its ability to help weight loss, improve bone health, boost the immunity system and its diabetic and cardiac friendly approach are gaining notice.
But most importantly Teff products have become popular because it is a gluten-free cereal. Celiac disease or coeliac disease is an autoimmune condition where the small intestine is unable to correctly recognize and metabolize gluten, a prolamin commonly found in wheat.
But after four years of the agreement, the company declared bankruptcy, and Ethiopia only earned 4000 euro since then from the transaction. Before the declaration of bankruptcy, the company managed to transfer some shares to other companies.
The patent also covers the milling of flour from these grains to a fine powder; the dough or batter resulting from mixing this flour with liquid; as well as a range of non-traditional products from such a dough or batter, including bread, pancakes, shortcakes, cookies, and cakes of various kinds. The company felt that such a broad patent was required to secure its investments in teff and thus also the prospects of benefit sharing with Ethiopia.
The issue which has multiple effects on Ethiopian further exploitation of the grain obtained the government’s attention recently.
Eng Getahun Mekuria (PhD) last year said to the parliament that the Ministry of Science and Technology has been fighting the patent right claims for nine months. The Ministry which took over the fight from the Intellectual Property Office (IPO) underwent various negotiations since 2017 with the HPFI, but with no results, which led the Ministry to submit all of its evidence at hand and the issue to the AG. The Office was expected to file a suit since that time.
Fitsum Arega, former Investment Commissioner and Chief of staff of the PM, tweeted on February 3, 2019, stating that the issue is the inability of the nation’s legal system to own its national assets.
“I’m told Federal Attorney General office is looking into it to hire international intellectual property lawyers. We need to defend it” reads a tweet which was written before a day of the other one. “I just learned that The Court of The Hague ruled against the Teff patent holder. This is great news. I hope we can learn from this that our national assets must be protected.”
Replying to Fitsum the Netherlands embassy quoted that the ruling was made in November.
“This embassy confirms the November ruling. The reason for the late announcement is because the time for appeal was still running. As no appeal was made, the verdict is now final: the claim of processing teff by the patent holder is null and void in the Netherlands.”
The Netherlands government has been grilled by intellectuals for its failure to protect the internationally accepted patent rights previously.
In the same conversation Brhanu Tesgaye, the Attorney General stated that the information is misleading as Ethiopia was not a party to the case.
“The information released about Teff is misleading and not accurate. The dispute was between two private partners and the judgment that was passed in the Netherlands has nothing to do with Ethiopia’s right. That said, Ethiopia has just finalized its preparation to defend its right.”
But he did not deny the fact that Ethiopia is preparing to claim and register the patent right in the international token and the recent ruling will be a good opportunity.
While these events were happening the Attorney General was in the Netherlands, as the official twitter page for The Hague Institute for Innovation of Law released information that it sealed the deal with the Attorney General to modernize Ethiopia’s justice system. The details of the signed MoU were not released or discussed by the Ethiopian part up to date. There are no traces leading that the agreement has anything to do with the teff patent.
The office signed a similar modernization deal with UAE companies last year to build an integrated justice system. The system is expected to interconnect the justice sector data. Unfortunately, the development of the system is behind the planned time to begin implementation because of various barriers.
HiiL is a social enterprise that emerged in 2005 devoted to the user-friendly justice system and founded by a small group of people who felt that justice systems were not delivering enough. The non profit organization is based in Hague, Netherland.
The Role of Eurasia In The Global Economy
It is true that any financial turmoil in China can create turbulence around the world and even hit New York. According to economic analysts, China could have avoided certain obvious mistakes which many saw coming. What the episode shows is how the relative weights are shifting in the world way beyond just trade.
The recent World Bank data reveals that China still accounts for less than 15% of global GDP, but its contribution to global growth last year was in the range of 40%. So when China’s growth slackens, pretty much every one around the world feels it. Not surprisingly, therefore, people all over the world are concerned about China’s prospects.
In a bid to build global-Asia connectivity, President Xi Jinping took an initiative of “One Belt, One Road”. The initiative is of huge importance, not as an immediate plan, but as a long-term approach toward China’s development. To begin with,George Yeo, the former Foreign Affairs Minister of Singapore stated that China has all excess capacity in steel, cement, factories producing rolling stock and so on which can be applied to great use linking China to its neighbors. This growing connectivity of China to its neighbors deep into Eurasia is a story of epic proportions.
Three years ago, China established a rail link to the Persian Gulf via Kazakhstan, Turkmenistan and Iran. With the opening of Iran, the dynamics across a large part of Asia will change. Throughout history, Imperial China and Imperial Persia, two high civilizations, always had good relations maintaining peace in the region. China, ever a comprehensive, long-term planner, is proposing or already executing enormous railroad expansion to the Gulf of Thailand, to the Andaman Sea, to the Arabian Gulf, to the Black Sea, to the Baltic Sea and all the way to the North Sea.
Back in 2016 China and Russia agreed in principle to build a fast train connecting Moscow and Beijing probably through Kazakhstan. The distance between these two cities is 7,000 km, and the journey is supposed to take less than two days. But all these calculations about the economic feasibility change profoundly if, along the way, one builds a belt of cities. This is why the words “One Belt, One Road”, announced by President Xi first in Astana in October 2013, and then in Jakarta in November 2013, are far more than a slogan.
According to George Yeo, they represent a strategic reorientation. “One Belt, One Road” goes way beyond being a plan on paper. It is intended to create a huge flow, a 21st century revival of the old overland and maritime silk roads, and at the end to find all of Eurasia crisscrossed by connections. Using a biological metaphor, the growth of these connections is likeangiogenesis in the human body. First the vessels grow, then logistics companies provide the blood circulation and development of organs follows.
George Yeo stated that Eurasia is a large part of the world, and it will, in a few decades from now, be the principal driver of the global economy. China knows that to improve the productivity of its real economy, it must deepen and liberalize its capital markets. Despite the recent financial turmoil, this strategic intent to deepen capital markets will not be deflected. The Chinese are now attempting to create two separate oceans of renminbi, one within China, which is the much larger one, and another outside China of which London is determined to be a major financial center.
An important question here is why can’t China allow the internationalization of other currencies like other major countries? To understand this we have to go back to the long history of China and the difficulty of governing a large part of the world’s population. Professor Jay Ogilvy of Yale University explained that whoever governs China must always be able to exercise some control over its own internal destiny. In the second half of the 19th century, after the second opium war, western customs officers inspected any ship landing on the China coast. Professor Jay Ogilvy noted that by the late Qing dynasty, China had lost control of its monetary system and therefore an important part of its sovereignty. China will not allow this again.
What about fears that China will go into recession? According to Professor Jay Ogilvy, this is not likely. He explained that China’s growth will slow down, maybe to 6%, or even 5.5%, but is now on a very high base of a GDP of about $10 trillion. That the slowdown in China is causing alarm around the world is because of the lack of aggregate demand powering the global economy. Despite easy money in the last seven years, the global economy has still not performed well. Central bankers fear that if they withdraw the liquidity, asset markets will implode, bubbles will burst, and the real economy will spiral downwards.
Fareed Zakaria in his 2003 published book entitled “The Future of Freedom”. stated that China is probably the only major country in the world today which is able to exercise a national will on a range of subjects. This is principally because the economy is still in a late adolescent phase and partly because the political culture over the centuries accepts centralized governance. For example, when President Xi promulgates “One Belt, One Road,” the message percolates right down and funds are allocated. The countries involved know it is credible because it is backed by a strong national will.
There is much talk about the South China Sea becoming a flashpoint. It is true that the South China Sea is important, but it is not the most important issue. It is a trial of strength between the United States and China but one which both sides will be careful not to mismanage. The most important issue is still the global economy, because if we get that wrong, everything else is in danger.
