Contemporary economics literature explains that Globalism, at its core, seeks to describe and explain nothing more than a world which is characterised by networks of connections that span multi-continental distances. It attempts to understand all the inter-connections of the modern world and to highlight patterns that underlie and explain them.
President Donald Trump rode his “anti-globalist” campaign message all the way to the United States presidency. In essence, President Trump declared anything and anybody who was not blatantly an American nationalist a “globalist.” Political pundits asserted that a key reason why President Trump and his message mavens deployed the term in that manner was to shield the candidate against predictable charges that it was preposterous for a billionaire, and one truly given to the gilded lifestyle, to get to the White House by pretending to save the common folk.
Joseph Nye, the former Dean of the John F. Kennedy School of Government at Harvard University stated that at its most basic level, globalism is very simply a philosophy dedicated to bringing people closer together all over the world. It is fundamentally about learning from each other’s successes or failures and promoting cooperation as well as prosperity. Joseph Nye noted that self-styled“anti-globalists” have tended to flatten the definition conveniently into something more specific – in the sense of defining it as whatever it is that they oppose in the world.
Lee Howell, Managing Director, Head of Global Programming, World Economic Forum argued that on the left, anti-globalism has focused on trade deals and the abuses of hyper-capitalism by a wealthy few individuals and multinational corporations. On the right, especially in the United States, anti-globalists run the gamut from Americanists who would prefer a world led and dominated by the United States to libertarians or small-government conservatives. They all like to misconstrue globalism as a movement for a “world government.”
According to Lee Howell, there are also far-right critics who view globalism through the lens of conspiracy theories that purport to identify shadowy cabals pulling the strings of world events. These conspiracy theories, over the centuries, have at various points been anti-Catholic, anti-Masonic, anti-Semitic or all of the above.
Maham Abedi, National Online Journalist stated that it is difficult to tell where exactly on the conservative-to-far-right spectrum President Trump himself places his anti-globalism. To be sure, his anti-globalism bears little resemblance to the left’s anti-globalism, not least because his administration is filled with the plutocrats they abhor. He also very much seeks to project the U.S. hegemony they abhor as well. But again, none of these anti-globalist definitions of “globalism” truly capture the spirit of the philosophy at its root.
It is true that international cooperation doesn’t equal world government. The pursuit of international cooperation and the attempt to shape an equitable form of global governance do not equal world government. There are problems to solve that are bigger than any one sovereign state. And as regards global governance, one can have a de facto version of it which is traditionally called imperialism or a more enlightened, better balanced one. That is the one the democratic world is struggling to establish today.
Maham Abedi noted that any constructive vision of globalism, which people have always embraced, simply means finding ways to bridge the cultural and political, even civilizational, divides between governments on areas of common need or concern. To bridge those gaps, this inclusive kind of globalism dispenses with the belief that any one area of the world is by nature superior to the others and that it has all the right answers. It also militates against the Trumpian notion that nothing positive can be gleaned from other cultures or governing styles.
In the 20th century, this kind of globalism saw a shift toward flexible supra-national forms of cooperation and alliances. Extending that arc of cooperation goes well beyond the oft maligned EU. The 21st century is seeing a plentiful rise of city and other sub-national governments as global actors.
Joseph Nye strongly argued that in contrasts to the zero-sum worldview of the Trumpists, there is no upward or downward transfer of power in globalism. There are simply ever more actors at the table to work with and learn from each other. And there are many more stages to act on. Our globalism is also, contrary to the narrowly defined leftist version of the critique, far from the multinational hyper-capitalism of today and the heinous colonialism of the preceding era.
Lee Howell noted that the constructive, non-elitist form of globalism people seek aims to re-focus economics on people. Wealth should not be concentrated in the hands of a few individuals and corporations or squirreled away in tax havens and real estate shells. In fact, those “taxing” games which many billionaires and multinational corporations continue to play need to be rooted out if democracy is to have a prayer of surviving.
Likewise, trade deals should not take away the sovereignty of the people or enhance the prosperity of a few at the expense of the many. International trade and economic cooperation should be for the benefit of all, not for exploiting workers in one country and consumers in another country. This also involves a sustainable increase in the standards of living of all of humanity to a basic level of comfort and material security. That, after all, matters far more than GDP rises alone.
As Maham Abedi and Joseph Nye well noted, understanding “the other” is the core of globalism. It is what people must ardently pursue to secure the peaceful survival of humankind.
Globalism in the Trump era
Low standards to coach EPL clubs
Coaches who have bad reputation or poor records appear to have a far better chance of employment with Ethiopian Premier League clubs, than new ones. Zemariam W/Giorgis, Ashenafi Bekele, Samson Ayele and Zelalem Shiferaw are among others that appear to have the miraculous password for every team, while new comers hardly get the chance. The trick is to join the exclusive party of coaches and once you are there it is routine to re-circulate yourself around teams every season. 
Zemariam W/Giorgis sent Woldya to relegation and was handed a one year suspension from the EFF but bounced back in no time as coach of champions Jimma AbaJifar replacing Gebremedin Haile. Signing a relegated boss to lead champions must be for the first time in world football and the consequence of such a deed is what AbaJifar is today. They are 9th in the league table and complaints of mal administration are piling up.
Booted out of the national hot seat following a horrible defeat at the hands of Ghana, Ashenafi took over at Ethio-Electric only to lead them down the drain to the lower division. Here he pops up once again after eight months of home rest. This time he has been handed a larger undertaking of saving Dicha from relegation. How he got the chance despite his bad record is hard to understand unless you are a club official.
Samson Ayele was called from semi retirement to bestow a huge challenge. In perhaps the hardest of his career, he is trying to lead bottom of the table Sehul-Shere to safety. With one win, eight draws and six defeats. Sehul is camping 15th in the table with 11 points. Here comes the surgeon from home to fix that misery. Sending Sehul to hell, Daniel Tsehaye took over his former team, bottom of the table Dedebit for a second spell. Though Daniel was the coach who steered Sehul to promotion last season, his current record makes him an unlikely candidate for the big task of helping Dedebit to survive at the end of the season.
Is there any set of standard how and why bosses are appointed at clubs? Hello EFF…..the hot line is calling…any one there?
Mulualem signs Sehul, Salhadin out for four weeks
Less than a week since leaving Debub Police, the 35 year old veteran midfielder is back to Premier League action putting his signature to relegation threatened Sehul Shere. It may be six weeks before the Ethiopian international Salahadin Said can play, following a successful appendix surgery.
New Coach Samson Ayele, who has returned from a hard earned away debut match draw last weekend, made a very bold decision. He signed former Saint George, Sebeta, Ethiopia Medin, Hawassa and Debub Police play maker Mulualem Regassa through the end of the current season. Even though Sehul had signed seven players during the mid-season break, including three foreign players, there appears to be a place for an old hand like Mulualem to share his experience as a midfield general who had seen everything in football.
“With Five Premier League titles and more than a dozen years in the Premier League and the Ethiopian National Team, Mulualem is a player full of decorations who can influence the changing room by boosting team spirit,” former player Solomon Megersa suggested.
In other news Saint George, and national team striker Salhadin Said will be out for at least a month after having his appendix removed. After experiencing sudden abdominal cramps while training Wednesday, Salhadin was rushed in to hospital to remove his appendix. It seems unlikely he will return in less than a month. He scored five goals in six consecutive matches. Salhadin was fast recovering to his old form back from months of injury. Bed rest and staying away from heavy activities for at least for four weeks is the common procedure, therefore this is a big blow to Saint George as they trail the league leaders from twelve points behind.
Should Ethiopia Promote the Development of a Stock Exchange Market?
A few years ago, enamored by global channel television stock market reports, a very close friend of mine expressed his wish to see local stock exchange market summary reports on local TV screen minute-by-minute. As I was aware of some frustrated initiatives by individual promoters for setting up a stock market in Ethiopia in early 2000, my reflexive answer to my friend was that the Ethiopian government should take the blame for not allowing/delaying the establishment of a stock exchange market.
After the exchange with my friend, I had to engage in a more seriousand deliberatestudy which allowed me to understand the role of stock markets in the economic development of countries.Because of this opportunity, I gained a deeper understandingof the issues for myself–butdid not get anything that would encourage me to echo my friend’s wish again!
In the course of this short article, I will present the experience of some developing countries which have stock markets and the pre-requisites for successfully establishing such markets. My recommendations on whetherEthiopia shouldfollow in the footsteps of these countries and setup a full-fledged stock exchange market will be based on the empirical evidence from these countries.
As a financial infrastructure, a good stock exchange market performs basic functions including serving as: a source for financing new investments; a mechanism for mobilizing savings; a key platform for investment diversification and efficient use of capital through a market for corporate control; a mechanism for monitoring investments through information dissemination.
The promises of a stock market are so enticing that most political leadersfind it difficult to resist the temptation to accept the recommendationsof international institutional promoters of the market as a panaceafor accelerating economic development.The big and practical question, which is often unasked and unanswered however, is whether the claimed benefits are automatic and, if not, what it would take to get these benefits.
At present, there are 29 stock exchanges that ‘serve’ about 38 countries in Africa but the major exchanges that have notable contributions to their respective countries’ economy are only four: Johannesburg Stock Exchange (South Africa), Nigeria Stock Exchange; Casablanca Stock Exchange (Morocco) and Egypt Stock Exchange. The rest are not worthy of the name.
The common and traditional methods of measuring the development and depth of a stock market aremarket capitalization and market turnover. Market capitalization is the number of shares traded in the stock market multiplied by the stock price whilemarket turnover is the value of shares traded in the market during a certain period. Both market capitalization and market turnover can be expressed against a country’s GDP to measure the depth of the stock market in an economy.
Measured in terms of market capitalization of companies listed in stock exchange, the Johannesburg stock exchange is about five times bigger than the combined market capitalization of the next three top stock exchanges in Africa.The above top four stock exchanges raised USD 10.6 billion from 2010 to 2017, out of the total USD 12.8 billioncapital raised through Initial Public Offerings (IPOs) in all of Africa’s stock exchanges. This was about 83% of all of Africa’s IPOs.
An important indicator of a useful stock market is liquidity.Stock market liquidity refers to the market’s ability to purchase or sell a financial asset (share, bond etc.) without causing a drastic change in the asset’s price. In an illiquid stock market, selling a financial asset may require some reduction in the price of the asset… There are studies which argue that investors are unlikely to commit funds for long-term investments in the absence of well-functioning stock markets that can provide them with a reasonable level of liquidity.
,Achieving liquidity in a small economy and in an open systemis easier said than done. To my knowledge, there is no agreed economic or financial model thatcan predict stock market liquidity and viability before its establishment.However, the stages of development of the key institutions that supporta smooth working of stock market can be observed beforehand.
Setting aside macro-economic factors which also need to be managed by an independent and professional central bank for the good of any economy, there are many empirical studies that suggest key ‘pre-requisites’for establishing a stock exchange market. These are:the contractual saving institutions; the accounting andauditinfrastructure; the legal and governance structure and the independent regulatory and supervisory infrastructure (this can be established upon setting up the market).I would like to highlight the current state of development of some of these key pillars in Ethiopia.
Contractual savings (pension funds and life insurance) institutionsare the powerhouseswhich ensure the continuous supply of long-term funds that are critical for the development of stock markets in an economy.Unlike commercial banks, contractual saving institutions have long-term and illiquid liabilities in their balance sheet and are the prime pillars for stock market development and the market for long-term government bonds.
Studies made in this regard predominantly suggest that developing countries should first focus on developing contractual saving institutions before establishing a stock market. However, such institutions are not well developed in Ethiopia to provide the required long-term finance to a stock market.
The pensioninstitutions which are currently collecting money both from the public and private sectors are currently owned by the Ethiopian government. The institutions are the main sources of long-term finance for the Ethiopian public sector as well as for the government priority projects. It is also necessary to notethat the funds of the institutions are channeled through government owned banks. In the short term at least, the pension institutions cannot withdraw their funds from government owned banks to invest in a stock market without seriously affecting the activities of the banks.
It is also noteworthy that both the life and non-life insurance markets are too thin to provide the long-term finance needed for a stock market. Even in comparison with neighboring countries, the size of the Ethiopian insurance market is too small to sustain a stock market. For example, Ethiopia’s insurance market is less than 25 percent of the insurance market of Kenya.
The accounting and audit profession is the prime supplier of financial information to stock marketsand is a critical backbone for information intermediation.However, a survey conducted on 102 top accounting and financial professionals in 2008revealed that 86 percent of the respondentsbelieve that thecountry’s accounting and audit profession is weak to provide reliable financial information to primary users.Since then, however, the Ethiopian government has passeda financial reporting law that recognizes international reporting standards and established an Accounting and Audit Board to regulate the profession. Establishment of the Board and recognition of international reporting standards for wider use in Ethiopia are in the right direction. As a practitioner in the profession;however, I have the opinion that the accounting and audit profession still requires close monitoring to discharge its responsibilities and to properly serve an open financial system such as a stock market.
Various corporate finance literatureemphasizes the importance of legal infrastructure and governance system for stock market development with the objective of protecting the right of investors and creditors and ensuringtransparency in the management of listed companies. The company law which was enacted in 1960 but remained dormant for most of its life needs a complete overhaul to make the required amendments for outdated provisions and additions that are necessary for protecting local as well as cross border investments.
Public confidence in the workings of a stock market system is paramount not only for mobilizing local savings, but also for attractinginward capital inflows for investment opportunities in the country. However, with the exception of the Financial Institutions, there is no widely used corporate governance code that is applied in Ethiopia. The recent big profile scandal in relation to alleged misappropriation of mega project funds indicate that the country still requires time to set up appropriate institutions that enhance transparency in management of the economy and build public confidence before setting the‘rule of the game’ for aformal stock exchange marketso that our current bank based financial system will usefully be complemented.
Unlike bank based financial system, stock markets work on the basis of accurate, transparent and timely public information.Notwithstanding the macro-economic factors in a country, I have the opinion that poor liquidity of stock markets may result from: problems of weak corporate governance in the economy;weakcompany laws; an inefficient and weak legal structure; low level of development of the accounting and auditing institutional framework and low level of development of financial intermediaries. Weaknesses in all these institutions have a bearing on the processing, accuracy, reliability and timely supply of required information for the effective operation of this open financial system.In absence of strong institutional safeguards, a stock market can easily be turned into a gambling platform with serious economic and political consequences
Because of institutional challenges and size of the economy,many studies state that the costs of a stock market financial system for many African countries outweigh the benefits.This isa very serious finding.There are also studies that ascribe the 1997-1998 Asian financial crisistopoor governance system, weak accounting and auditing standards and structural problem in financial intermediation than to macro-economic factors.
The study made in East Africa Stock Exchanges in 2008 (Kenya, Tanzania and Uganda) revealed that lack of public confidence in the system, loss of control in a company and fear of public disclosure were the prime factors for the small number of companies listed in the exchanges. In 2008, the total number of companies listed in the three stock exchanges was less than 70 (Kenya 54, Uganda 6, Tanzania 6). After ten years and including Rwanda, the number of companies listed in the four East Africa Stock Exchanges is less than 115 (Kenya 64, Rwanda, 8, Uganda 17, Tanzania 25).
The most important motiveof developing countries forestablishing a stock market is to solve problems associated with long-term financethrough attracting inward capital flows and mobilizing local savings. However, the use of a stock market as a source for financing new investments has very little empirical support. For instance, the study made on UK and US stock exchanges from 1970 to 1985 demonstrated that most companies do not use the stock market as a source for financing growth. Once listed, companies prefer to use internal finance instead of the stock market.
Coming closer to home to East Africa,the Nairobi Stock Exchange which was established in 1954 – and is by far the better performing exchange in East Africa- has not been used by non-finance companies listed in the exchange to raise additional capital from the stock market between 1990 and 2007. During this period, only two finance companies raised Kenyan Shilling 3.2 billion (USD 45.6 million) from the stock market.From 2013 to 2017, only two IPOs with a value of USD 42million raised capital fromthe Nairobi Stock Exchange.
Stock market financial systemrewards short term financial performance of companiesat the expense of long-term growth prospects because of analysts and investors pressure to get results in the short-term. A company which might have an attractive long-term growth potential but does not deliver results in the short-term can be wiped out of the system. In a growing economy, this is a determinant to the development of a country. As witnessed even in developed countries, this short-term pressure may even encourage companies to resort to all sorts of tricks including ‘creative accounting’ to boost share price regardless of the true underlying performance of the companies.
There are studies which argue that countries get the best out of stock exchanges once their economic growth reached a certain level of development. For instance, the engine of economic development for Germany, Italy, France and Japan is not stock market even if all of these countries have later supplemented their bank based financial system with a stock market. This is because both bank-based financial systems and stock market based financial systemscan bring economic development to a country.There is no empirical evidence which suggests thatstock market based financial system is better than bank based financial system.The advantage of a predominantly bank-based financial system is thatfinancial transaction disclosures and personal affairs of investors is limited between the banker and the investor only. This limited and closed relationship is good in a country that has weaker institutions to govern proper functioning of an open stock market.
It would be difficult to establish a robust stock market by simply transplanting the market structure, trading system and even regulations from a well-functioning stock market. Although it is easier to copy any laws or trading systems, it is not easy to copy institutional structures and users’ confidence.An open system which is embedded and routinizedin a particular economic systemcannot be copied to analien environment. For instance, there are studies which highlight that from 1990-1999, 20 of the 26 transition economies established stock markets; however, many of these markets remainedunderdeveloped or dormant because of poor development of basic infrastructure necessary for a well-functioningand vibrant stock market.
The proposed privatization of big public enterprises by Prime Minister Abiy’s government should not be a push factor for establishing the stock market. This is because, once listed, the market will not be big enough to raise subsequent growth finance by the companies. The bigger stock market in Africa, the Johannesburg stock exchange serves as a secondary market for its top ten listed companies. The big companies use the London Stock Exchangeas their primary listing. Hence, rather than running a possibly illiquid local stock market, it is possible to buy the services of a liquid stock market by allowing companies to be listed in a foreign liquid market. But this requires liberalization of the Ethiopian economy, particularly the foreign exchangeand a great deal of work by the companies to be listed.
In conclusion, I have a strong opinion that giventhe present stage of itseconomic development and weak institutional infrastructures,Ethiopia can benefit more by using the bank-ledfinancial model as its prime financial systemrather than sharing the meager savings to both systems.
The government may alsoallow thesetting up institutional and approved,but closed,dealers network that can buy and sell shares in a secondary market on behalf of companies that have already thousands of shareholders.
I also recommend that the government need to develop medium to long-term institutional development plan supported by appropriate national policies to build: contractual saving institutions and legal, governance, accounting and audit infrastructures to serve as strong foundation for a stock market development.Once this is done, the country can establish a full-fledged strong stock exchange market system that usefully supplement the bank based financial system forsustainable economic development of the country.
Solomon Gizaw is a Managing Director of HST Consulting. The opinion expressed in this article arehis own and not reflect the views HST. He can be reached at solomon.gizaw@hst-et.comfor any comments on his views.
