Ethiopia’s Developmental State
Model: A Reflection on Francis Fukuyama’s Article
Asayehgn Desta, Sarlo Distinguished Professor of
Dominican University of California
Given that the core matrix of Ethiopia’s Developmental State
Model was economic growth, from 2005 to 2015, Ethiopia remained as a
compelling example of how an African country could achieve steady
state-directed economic growth, social transformation, and infrastructure investments, by providing easy access to primary and preventative
healthcare, reducing social inequality, and mobilizing peasant farmers.
However, due to administrative obsolescence, dysfunctional
appointive of bureaucrats, political upheaval, ethnic strife, and weak
macroeconomic management, Ethiopia’s Developmental State Model has been
breaking down. Currently, Ethiopia is on the verge of slipping backward
into economic decline, facing poverty, inflation, unemployment, heavy
external debt, and a rise in ethnic conflicts (Ottaway 2019 and Desta,
Alluding to the East Asian classical Developmental State
framework, in his article entitled “Democracy and the Future of
Ethiopia’s Developmental State Conference,” Professor Francis Fukuyama
(June 11, 2019) attempts to authenticate the “state quality” and
compare the difference between the Ethiopia’s Developmental State Model
and the East Asian Developmental State paradigm.
An Observational Analysis of Fukuyama’s article
According to Fukuyama, some of the vital factors that have contributed to the “ups and downs” and impeded Ethiopia’s Developmental State Model arose from: 1) Lack of privately owned enterprises, 2) inadequate recruitment and promotion of Ethiopian bureaucrats, 3) imperfect valuation of the internal rate of return (IRR) and the externalities impact of the Chinese mega projects in Ethiopia, 4) imperfect access of Ethiopia’s exports to Western markets, and 5) lack of a unifying national identity.
Using the above-stated framework, Professor Fukuyama (June 11,
2019) concludes that Ethiopia’s Developmental State Model would have
achieved a sustained pathway of economic and social development, provided
the ruling party, the Ethiopian
People’s Revolutionary Democratic Front (EPRDP): 1) subscribed to
an overarching sense of common and uniting nationhood, 2) decentralized
its important forms of political power, giving people local autonomy, and
3) pursued reflective democratic praxis rather than leaving the
concentration of power in the hands of an executive.
Privately Owned Enterprises: A review of the literature
indicates that during the Derge’s era, Ethiopia lagged behind
other African countries in terms of the scale of privatization, because it
lacked political will. As a substitute for the central planning system
practiced during the Derge’s period, the EPRDF ruling party promulgated
Proclamation No.87, in 1994, and the Privatization of Public Enterprises
(Proclamation No. 146, in 1998) to privatize state-owned enterprises. That
is, the EPRDF decided to convert the small- and medium-sized state-owned
companies to market-based, privately owned enterprises in order to qualify
Ethiopia for the conditionality of the structural adjustment funds set by
the International Monetary Fund, World Bank, and other multilateral
With the funds that Ethiopia received from the multilateral
funding institution for the implementation of the Structural Adjustment
Program (SPA), it was expected to achieve macroeconomic stabilization,
generate competitive products for exports, relieve the country from budget
deficit and large external debt, and improve the profitability and
efficiency of the then-newly-formed privately owned enterprises (Gebeyehu,
2000, and Ismail 2018). To the surprise of the Ethiopian
government, Selvam’s (2008) study showed that after the implementation
of the privatization process in 1994, the production level of the
privatized firms in Ethiopia declined by 14.21 percent from 1995 to 2004.
Gebeyehu’s study (2000) also established that out of 223 privatized
firms, 69 percent (154 firms) were found to be relatively inefficient
compared to 75 percent (167 firms) and 71 percent (158 firms) of other
public and private firms, respectively. Based on his findings, Gebeyehu
strongly warned the Ethiopian government that it “…should revitalize
its hasty move towards transferring public enterprises to private hands”
Similarly, a study by Rebeka (2001) of the 25 Ethiopian
private enterprises, indicated that while privatization had a positive
technical efficiency in the food-processing industries, it had negative
effects on the beverage, textile, and leather sectors, and showed no
effects on the non-metal, wood, printing, and chemical industries.
Similarly, a study by the World Bank revealed that out of 29 sub-Sharan
countries that had adopted the structural adjustment program, including
privatization, the economic conditions of the nine showed insignificant
improvement, nine companies showed no improvement, whereas the economic
conditions of eleven enterprises deteriorated.
Proponents of neoliberal economics assume that developing
countries can successfully lure foreign direct investments provided they
adequately pursue policies of privatization. Interestingly enough, after
the privatization policy was proclaimed by the Ethiopian government in
1994, Ethiopia’s balance of payments status persistently deteriorated
(Desta, 2019). Part of the reasons for the sustained decline in
Ethiopia’s balance of payments were because Ethiopia’s exports were:
1) agriculturally based (such as coffee, live animals, leather products,
flowers and chewable leafy shrub (chat)), 2) sensitive to weather
conditions, 3) strongly affected by price shock, and 4) low value-added,
causing them to remain uncompetitive in the international market.
Gebeyehu’s (2000) study further demonstrates that despite
privatization initiatives, the share of foreign owners of privatized firms
in Ethiopia amounted to less than 20 percent. In addition, Selvan (2005)
persuasively argues that privatization had little impact on capital
accumulation. According to Gebeyehu (2000), however, Japan, South Korea,
and other East Asian Tigers achieved economic success not only because of
privatization schemes, but also because the governments arranged export
promotion subsidies to help private firms.
The above results of investigation on the effects of
privatization on the Ethiopian economy don’t seem to align with
Fukuyama’s (2019) assertion that the slumbering of the Ethiopian
Developmental State is attributable to Ethiopia’s nature as
“state-driven with very weak private sector.” Even though, like the
East Asian Tigers, “there has not been a partnership between strong
government and strong private sector” in Ethiopia, privatization
stumbled in Ethiopia because the government failed to pursue giving
consistent government subsidies to the privatized firms. In addition, the
privately-owned enterprises in Ethiopia were left at the whim and the
mercy of a fragile and fragmented market. So, what the Ethiopian
government can learn from the East Asian countries is that for its
Developmental State plans to flourish, Ethiopia needs to pick winners and
aggressively pursue active government intervention to energize its
privately-owned firms (Gebeyehu, 2000).
Recruitment on Meritocracy and Promotion on Performance: The classical Developmental State
Model assumes that government business planning and intervention in the
market rekindle economic growth and facilitate social development. That
is, even though Fukuyama didn’t develop a theoretical framework that
pertains to this, a Developmental State becomes more effective and
efficient when managed and run autonomously by a group of professional
elite (Evan, 1994). However, I entirely agree with Fukuyama that the
recruitment of professional bureaucrats in Ethiopia should have been based
on merit, and promotion of employees should have been based on
achievement. As narrated by Haggard (2018), qualitatively, the political
foundation of a Developmental State needs to rest not only on the role of
the regime, institutional accountability, and the rule of law, but also on
the professionalization of personnel, bureaucratic autonomy, and the
capacity of the state to deliver services, and get feedback and criticisms
from its constituency that make sense.
Article 39 (3) of the Ethiopian Constitution states that
“Every Nation, Nationality and People in Ethiopia has the right to
equitable representation in state and Federal governments” (1994). Under
this pretext, appointments into the Ethiopian bureaucratic structure
should have been based on equality. Fukuyama rightly argues that the
“civil service” in Ethiopia hardly meets the above-stated quality. As
thoroughly reviewed by Desta (2014), an examination of the Ethiopian
Developmental State Model over the last fifteen years reveals that higher
positions in various governmental departments were literally assigned
according to an ethnic-based quota system. Once recruited, the
higher-level employees are expected operate in line with their ethnic
affiliation rather than in pursuit of the goals of the organization. Since
the Ethiopian government elite were by-and-large politicians and heavily
involved in the country’s political process, they never had a selfless
devotion to the Ethiopian economy. The civil servants by-and-large were
political cadres, mainly recruited for the existence of the ruling party
As narrated by Fukuyama (June 11, 2019), over the years, the
Ethiopian developmental state paradigm was administered by civil servant
functionaries who were politically accountable to their parties. That is,
in comparison to the East Asian Developmental State Model, which was
administered by highly educated meritocratic bureaucrats, who exerted
professional discipline to plan and implement efficient policies, the Ethiopian people have never been empowered to expect the minimum
from public servants.
The Internal and External Rate of Return of Chinese Investment
in Ethiopia: Because of an exponential and sustained growth in its economy, the
Peoples’ Republic of China (hereafter referred to as China) has been
positioning itself at the forefront of challenging Western firms in terms
of establishing investments in Africa. More recently, China has deepened
its involvement in Africa by bestowing a mix of loans with generous terms,
direct investment, training, debt forgiveness, and infrastructural
As a professional, Fukuyama (June 11, 2019) refrains
from bashing China. Also, Fukuyama appreciates China’s insistence on
promotion through opening and sharing development opportunities with
developing countries. Without presenting clear evidence, however, it was
shocking to learn from Fukuyama that he blames China for Ethiopia’s
heavy indebtedness. Sadly, to make his argument, Fukuyama, without
presenting empirical results, claims that China failed to prudently
estimate the internal rate of return (IRR) and gauge the externalities of
its mega-investments in Ethiopia. Contrary to Fukuyama’s assertation, it
needs to be made crystal-clear that the Chinese EXIM Bank policy requires
that in all overseas investment, prospective investors are required to
estimate the internal rate of return in order to qualify for all the
loans. Thus, without taking into consideration the size of projects, it is
probable that the Chinese IRR estimates have taken into consideration that
the interest rate at which the present value of future cash flow is equal
to the required capital investment. For instance, in terms of estimating
the IRR, while other foreign companies make profit margins of 15-25
percent, Chinese companies operating in Ethiopia make profit margins of
under 10 percent (Desta, 2014).
At this juncture, it needs to be emphasized that China has
been Ethiopia’s major provider of hard-earned strategic and
concessionary loans, investments, grants, and aid (Desta, 2019).
Particularly in the natural growth of Ethiopia’s Development State,
there is no doubt that Ethiopia has drawn considerable knowledge,
experience, and policies from China. More recently, Fukuyama should have
understood that while still dominating the infrastructure space, China’s
engagement with Ethiopia has been deepening and broadening in scope, and
China has agreed to reduce and restructure or
overextended the repayment period for some of its loans, ranging from 10
to 30 years (Kiruga, 2019).
Though barely touched on by Fukuyama, as the cost of
manufacturing goods has shot up in China, state-driven Chinese investments
have been transitioning and mushrooming in Ethiopia. The driving force for
China’s interest in Ethiopia has been to acquire natural resources,
diversify its supply of industrial inputs, serve as a source for oil and
other industrial materials, utilize the Ethiopian market for Chinese
export, and use Ethiopia as its back-door entry point to Western markets.
However, it needs to be made clear that in the process of generating and
working on various forms of Sino-investments projects, State-owned
companies arrive in Ethiopia with their own work force. The Chinese
investors by-and-large control decision-making. Chinese investment in
Ethiopia creates limited local employment opportunities and mismanagement
of Ethiopia’s renewable and non-renewable resources. Also, though barely
examined by Fukuyama (June
11, 2019), it is sad that Chinese investment in Ethiopia has been
insensitive to negative environmental externalities (see Desta, 2014).
Export-Led Growth Policy: Neoclassical economists stipulate that Export-Led-Growth
or outward-oriented export promotion strategies focusing on open trade,
ease on foreign exchange, increase of imports of high-quality intermediate
capital inputs, enticing export-oriented foreign direct investment, and
access to international markets contribute to growing productive capacity,
and encourage diffusion of technology knowledge, improvement in economies
of scale, and improvement of human capital, as well as faster economic
growth (Krugman and Obstfeld, 2014). Using an open trade policy with an
export-led growth strategy, during the classical Developmental State era,
the four East Asia “tigers”—South Korea, Hong Kong, Singapore, and
Taiwan—achieved a remarkable record of high and sustained economic
growth (Allaro, 2012, Palley 2011).
According to Araia (2012), South Korea and Taiwan achieved
miraculous economic growth during the classical developmental period not
only because they had visionary and committed leadership, but also due to
their prior experience with development projects from when they were
Japanese colonies. In addition, Araia persuasively argues that South Korea
and Taiwan had “…a unique historical circumstance during the Cold War
that they took advantage of. They enjoyed massive amounts of economic,
technological, and defense aid from the United States.”
Nowadays, Fukuyama argues that given Trump’s trade policy,
the US can no longer provide “free riding” of its domestic market and
run a trade surplus over an extended period of time to developing
countries, as it did to South Korea, Taiwan, Hong Kong during the middle
of Cold War period, accelerating their economic growth (see also Haggard,
2018). Using the same line of argument, Haggard strongly argues that
“development states emerged in a particularly permissive international
context, in which both the geostrategic and economic interests of the
advanced industrial states provided space for their aggressively
export-oriented growth strategies. But,
says Haggard, if all developing countries pursue the same course of
action, “…their combined manufactured exports would eventually trigger
protection in industrial countries.” Fukuyama extends Haggard’s
assertation by stating that “it is very hard for developing countries to
break into an existing form of manufacturing because the efficiency of
East Asia is so great.”
Contrary to Fukuyama’s controversial assertion, empirical
studies seem to show that the economies of Southeast Asian countries and
other emerging economies are in the process of shifting or transitioning
their investing to low-cost African countries in order to lower their
production costs, using Africa as a conveyer belt to sell their products
in developed markets at competitive prices (see Davis, 2015).
Ethiopia has the largest domestic markets in Africa. Thereby,
it enjoys preferential market access to the European Union markets. More
recently, Ethiopia has initiated the African Growth and Opportunity Act (AGOA)
in order to access US markets. Given that Ethiopia has the largest
domestic market, along with access to foreign markets, several South East
Asian started collaborating with the Ethiopian Industrial Parks
Development Corporation (IPDC) in 2014 to establish the development and
construction of industrial parks in several parts of the Ethiopian region.
Currently, Ethiopia has a target of 30 industrial parks. These industrial
parks are designed to enhance economic transformation by attracting
foreign investment from Southeast Asian countries; processing
technological learning, upgrading and innovation; and improving the
competitiveness of local industry, thereby generating foreign exchange by
manufacturing exports. While projected to contribute 20 percent of
Ethiopia’s GDP, the Industrial Parks in Ethiopia are expected to be
“Eco-industrial Parks” and address environmental issues from the
outset (UNDP 2018).
As a footnote, it needs to be emphasized that Ethiopia has the
largest domestic market in Africa. In addition to its export-led growth
strategy, which some consider having exploitative characteristics in terms
of extracting surplus from the domestic economy (Palley, 2002), it is high
time that Ethiopia also focuses on domestic-led growth. Domestic-led
growth and export-led growth are inextricably intertwined and can create
rapid employment increases, providing sustained household income (Allaro,
2012). That is, meeting internal market demand can have many positive
spillover effects. It stimulates the country’s export sector and can
deter a possible global-market, crowded-out effect.
Unifying National Identity and Democracy: Fukuyama (June 11, 2019) arrives
at the conclusion that nations like Japan and South Korea, which
successfully implemented the Developmental State Paradigm, shared common
national identity characteristics (i.e., common language, common
ethnicity, common historical traditions, and common bureaucracy) as basic
requirements for economic takeoff. According to Fukuyama, Ethiopia’s
developmental state lacks not only these characteristics, but also power
remains concentrated in the hands of an “executive who might use it to
suppress social forces that are active on the ground.”
Like his mentor, Huntington (1993), Fukuyama argues that
Ethiopia cannot achieve unity based on equality of nations, nationalities
and voluntary unions, as designed in the Ethiopian Constitution of 1994,
because according to Fukuyama’s argument, the disharmony that exists
between the ethnic territorial units and the orientation of the various
existing forms of ethnic political parties would have a disastrous effect
on national unity and political stability.
Though different than Sen’s (1999) human capability index (which includes adequate
nourishment, leading a long and healthy life, literacy, shelter, and
political and civil rights), Fukuyama, by
giving little empirical information, assumes that the quality of the
Ethiopian government doesn’t reside at the intersection of autonomy and
capacity, but is rather measured by the quality and professionalism of the
people who work within the autonomous bureaucracy.
As stated in Article 50(4) of the 1994 Constitution, the
Ethiopian federal system is supposed to devolve from the center to the
local units in order to improve the effectiveness of the state and advance
the democratization process, creating conditions that would better allow
the system of checks and balances to work. Like the Africa Development
Bank (2009), Fukuyama narrates that in practice, the executive branch
exerts greater power vis-a-vis other branches of government. Though not
loudly articulated by Fukuyama, the dominance of one party behind the façade
of regional and local autonomy in Ethiopia seems to have severally
hampered Ethiopia’s proclaimed democratic rhetoric to be matched by
democratic practice. Other research shows that local autonomy is rarely
respected in Ethiopia. Except through sham elections, local people are
never allowed to choose their own leaders. Thereby, the needs and
interests of the communities are undermined, because local accountability
is offloaded to the central regional government or the federal level (see
Araia, 2012, and Desta, 2017).
Fukuyama asserts that “without the imposition of an
overriding unifying element, ethnic federalism by itself would not have
kept Ethiopia together.” Given that Ethiopia’s ethnic diversity is its
greatest asset, Ethiopia could have achieved full-fledged federalism had
it made a concerted effort to effectively socialized its citizens. It was
necessary to teach them not to be focused solely on protecting themselves,
believing that their ethnicity was superior to all other ethnicities, to
instill a positive multiethnic feeling and respect for the cultural
ornaments of other ethnic groups (Kiros, 2019). This instillation, in
conjugation to implementing strategies and tactics that can attract and
develop autonomous democratic decentralization, could have enabled
Ethiopia to achieve political stability and economic growth.
In its content and setup, Professor Fukuyama’s article is
well-written and seems to be designed for policymakers. Given this, the
article is very inspirational and has educational value. Fukuyama’s
analysis is convincing. Currently, Ethiopia’s Developmental State Model
is in a state of paralysis because Ethiopia overwhelmingly suffers from a
lack of national unity and democracy. However, when Professor Fukuyama’s
article is examined from an academic perspective, it does not strictly
follow the hallmarks of the scientific method. That is, Fukuyama’s
article is not rigorous enough and not well-documented. Before Fukuyama
arrived at the conclusion that the current state of Ethiopia’s ethnic
federalism impedes unity, it would have been worthwhile for him to have
developed a theoretical framework and sound methodological design from
which to examine his premise. This would have given him an intimate
understanding and a better grasp of the formation of Ethiopian federalism.
Briefly stated, Ethiopia’s federalism was established after
a coalition of ethnic liberation movements routed the Derg in 1991. The
past centrist unitary-oriented regimes that ruled Ethiopia were
dehumanizing, insensitive to certain ethnicities, and by-and-large
contributed to a colossal failure of Ethiopia’s economy. To render equal
power-sharing provisions, strengthen ethnic identities, and eventually
accomplish Ethiopia’s stability, in 1991, a committee composed of
multi-ethnic groups took the liberty to demarcate Ethiopia’s ethnic
groups into nine self-governing entities and two chartered cities. It
engineered democratic federalism to increase self-government, political
participation, and consolidate and harmonize all Ethiopian groups. In line
with Lenin’s philosophy that the masses might resort to secession only
when national oppression makes life intolerable, the 1994 Ethiopian
Constitution allowed every multinational state to have the right to
self-determination, with a constitutionally entrenched right to secession
As stated above, Ethiopia’s landscape is composed of
multi-ethnic groups. Instead of using draconian measures to encourage
diversity and solidify the horizon of national unity, the federal
Ethiopian government should have encouraged interpersonal dialogue, open
communication between its people on a personal level, to build respect for
the culture, beliefs, ideas, attitudes, and knowledge of all its citizens.
Given this framework, instead of analyzing at abstract that Ethiopia’s
Developmental State is struggling because it has lacked unity, Fukuyama
needs to know that federalism is a landmark in Ethiopian history and
regarded as a unifying factor. He should have attempted to explore how the
Ethiopian Developmental State Model is currently struggling because the
Ethiopian government failed to systematically socialize its citizens,
instilling in them that “Ethiopianity is not an abstraction. It is a
lived reality embodied in ethnic and national consciousness” (Kiros,
2019). As persuasively suggested by Professor Kiros, had the Ethiopian
Government fully attempted to effectively inculcate ethnic consciousness
at the local level over the last twenty-five years, there is no question
that its ethnic nationalism would have transcended and fully flourished,
resulting in a true Ethiopian consciousness. Since the Ethiopian
government hardly used systematic methods to implement and integrate
ethnic consciousness with the national consciousness of the Ethiopian
people, it can be argued that Ethiopia’s political federalism landscape
is rife with flashpoint indicators of ethnic disunity, separatist
tendencies, and loyalty conflicts, as well as ethnic looting, harassment,
To concretize Fukuyama’s concept of democracy to Ethiopia,
Ethiopia would have needed to have a vision, and then to have designed
policies and strategies, and initiated flexible governance to achieve
robust democratic autonomous federalism. Contrary to the devolution of
power grounded in the 1994 Ethiopian Constitution, and more particularly
stated in the 2001 amendment, the Ethiopian federal system and the
regional states didn’t allow the democratization process that could have
generated manageable and democratic self-rule of communal constituents. In
pursuance of the 1994 Ethiopian Constitution, the nature and possible
challenges of Ethiopia’s federalism could have ethnically designed the regional
states and subdivided them into manageable units. Following the “new
federalism” practiced by Canada, India, Switzerland, and South Africa,
the newly formed constituent units (states) in Ethiopia could be
effectively managed by breaking them into several manageable democratic
autonomous states. For example, the current nine states and two chartered
cities in Ethiopia could be divided into thirty-three regional states.
Each of the now-existing states and chartered cities could be further be
sub-divided into three regional states (i.e., 11 times 3 =33). The ten or
fifteen woredas in each newly designed state could be left to be
managed autonomously, governed on consensus, proportionally represented,
and ultimately agreeing among themselves to form a common regional state.
Stated differently, without
intrusion from any central or federal authority, each woreda within
the newly formed regional states could have complete sovereignty over
aspects of its political life by having several municipalities run by
community-elected mayors and council members.
In addition, Fukuyama’s abstract concept of democracy could
be concretely translated into
the Ethiopian situation, provided there is a devolution of real power from
the center to local units. Thereby, political power needs to be
transferred through the establishment of democratically and proportionally
elected local governments that ensure direct citizen participation. Simply
put, public officers in Ethiopia need to effectively represent their
citizens, be responsive by delivering services in line with their
citizens’ demands and held accountable for their decisions.
Given these factors,
Ethiopia’s journey toward autonomous, transparent democratic federalism
can become a reality if the government in power has the political sway to
sub-divide the existing regional states into manageable geographic regions
that incorporate adequate checks and balances. More importantly, Ethiopia
could develop strategies for the future and “… form a hybrid paradigm
where some developmentalist practices coexist with the prevalence of
privatization policies to harness a free market operations” (Desta,
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