Ethiopia’s Developmental State Model for the Future
Desta, Asayehgn, Sarlo Distinguished Professor
role of the state with little reliance on market forces was used as the
cornerstone for the renaissance of the economically successful Northeast
Asian countries, such as Hong Kong, South Korea, Singapore, and Taiwan
(Zhang, 2018, Ricz, 2016). Following the spectacular growth of many
economies in East Asia, developmental state is increasingly gaining ground
in sub-Saharan Africa. For instance, Botswana, Mauritius, Cote d’Ivoire,
Malawi, Kenya, Tanzania, Rwanda, and South Africa are labeling themselves
as “developmental” (Seshamani and Ndhlovu (2016).
To avoid the colossal failure of famine, insidious
civil wars, poor education, and deteriorating healthcare programs that
Ethiopia faced during the military rule (Dergue), the Ethiopian People’s Revolutionary
Democratic Front (EPRDF) established Agricultural Development Led
Industrialization (ADLI) in 1991 to deal with socio-economic challenges.
According to Leofort (2012), the ADLI was expected to increase the
productivity of smallholders involved in subsistence farming and to
facilitate national food security in Ethiopia.
An evaluation of the impact of the Structural
Adjustment Programs (SAPs), reveals that the SAPs as intended failed to
rescue crisis-ridden African countries. Instead, the SAPs ended in
disaster and contributed to the lost decades of economic development in
Africa (Mukuria, 2014). Given this, it was no wonder that the former Prime
Minister of Ethiopia, Meles Zenawi, persuasively argued that
neo-liberalism is “a dead end in Africa”. Consequently, Prime Minister
Meles urged Africa to pursue the democratic developmental state paradigm
to free itself from the shackles of perpetual impoverishment and work
toward an eventual renaissance (2006).
In 2001, Inspired by miraculous transformations in Taiwan and South
Korea, the Meles regime began adopting and
adjusting the East Asian Developmental
State Model to the Ethiopian economy. Thus, the Ethiopian state developed
wide-ranging, pervasive, and discretionary intervention and control over
the market to allocate the country’s scarce resources and influence the
direction of its economic growth and industrialization process.
Retrospectively, the late Prime Minister Meles
argued that he implemented the East Asian Developmental State Model to: 1)
create state autonomy and have full control over the commanding heights of
the economy (i.e., resources, banks, utilities, etho-telecom, and other
production sectors) 2) accelerate Ethiopia’s economic growth and focus
exclusively on value creation, and 3) protect the domestic micro-scale
enterprises over foreign direct investments ( See for example, de Waal,
Realizing the challenge and stress of a shift from
an agricultural to industrial ladder, the Ethiopian government allocated
twenty percent of its GDP to reengineer its infrastructural services, such
as roads, schools, railways, air transport, dams, telecommunication
services. Also, it attempted strengthen the backward and forward linkages
of agricultural and industrial sectors to promote macroeconomic stability
(Johnson, 1982, Desta, 2014, Shumuye, 2017).
After Ethiopia emerged from the traumatic
post-2005-election political crisis between the ruling party, Ethiopian
Peoples’ Revolutionary Democratic Front (EPRDF) and the opposition; the
EPRDF shifted its ideological orientation from revolutionary democratic
centralism to Democratic Developmentalism in order to address the effects
of soaring political upheavals and embark on the roaring wave of
globalization. Instead of continuing as a vanguard party, the EPRDF was
also reorganized as a transmission belt and serve as a catalyst. Unlike
before, the Ruling Party, EPRDF, promised to expand the country’s
democratic space by allowing the proliferation of think tanks, including
elements of political parties, government departments, corporation and
philanthropists. It further initiated Ethiopia’s economy to pursue a
relatively free and competitive market system (African Development Bank
Group, 2011, and Lefort, 2012, de Waal, 2018). Before
opening Ethiopian companies to private sector investment, however, the
late Prime Minister Meles decreed, with an authorized capital of 10
billion Ethiopian birr, to
establish Metals and Engineering Corporation (METEC), a military-run
industrial conglomerate, to serve as greenhouses or major hub for training
highly qualified military force in building factories and infrastructure
(Reuters, November 14, 2008). Then,
to gradually attract foreign investment, Meles’ government not only
invested heavily in infrastructure, it also provided macroeconomic
stimulations, such as tax holidays, subsidies, R& D support, tax
relief on imported capital. Furthermore, he allowed leases on virgin
farmlands to foreign investors (Desta, 2014).
Ten years after these economic reforms, an
increasingly lazy and inept EPRDF drove the country into political unrest.
Consequently, the Ethiopia’s unemployed and frustrated youth—the Querro, Fano, and Zerma—began
to rise up and challenge the ruling party, causing political turmoil
throughout the Ethiopian landscape. Whether by design or by default, these
popular protests created a golden opportunity for Dr. Abiy to step in and lead the EPRDF Party.
On April 2018, Dr. Abiy (hereafter
referred to PM Abiy) emerged as Ethiopia’s Prime
Minister (Gelan, 2018, Desta, 2018).
A cursory view of PM Abiy’s actions and speeches
over ten months suggests that PM Abiy has shifted from EPRDF’s
ideological platform. Often in defiance of his party members
and the Ethiopian Parliament, PM Abiy is unilaterally reversing the
country’s long-held developmental state. Using the dwindling
foreign-exchange reserves as an excuse, PM Abiy is bending and bestowing
to the core tenets of the liberalization and privatization processes. For
instance, it surprised Ethiopians to hear PM Abiy, in his inaugural
speech, order Ethiopia’s Privatization and Liberalization Office to
accelerate the sales of minority stakes of some of the country’s most
prized public assets to foreign investors. More specifically, contrary to
the EPRDF’s long-standing policy, PM Abiy, in a very noticeable way,
is privatizing government owned firms in order to generate foreign
exchange. Guided by the liberalization policy, PM Abiy has ordered
Ethiopia’s lucrative state-owned mega companies, such as Ethio-Telecom,
the electrical company, and the booming Ethiopian Airlines, to start
liquidating minority stakes to private investors.
To relieve the United States from facing tough competition with
China in Ethiopia’s priority arena, PM Abiy’s regime has practically
turned its back on China. Over the years, China has been Ethiopia’s
major provider of hard-earned strategic and concessionary loans, investments, grants, and
aid (Desta, 2018). As a
result, despite Ethiopia’s failure to meet World Bank standards, the
World Bank has promised $1 billion for Ethiopia’s budget support.
Based on Abiy’s current tactics, critics could argue that he
rejects Ethiopia’s Developmental State
Model and that he may even plan to replace it with neoliberal model. As a
result, a number of African countries wonder why, when the
developmental state model has enabled Ethiopia to achieve economic growth
in the past, Abiy would now consider a shift to the Washington Census
Model as a possible panacea for Ethiopia’s future socio-economic
Given Ethiopia’s current situation, many strategists of the
Washington Consensus—a program sponsored by the World Bank and the
International Monetary Fund that requires dismantling the developmental
state and borrowing countries to have free market, open
goods and financial service markets to foreign investors—seem
ecstatic. Even though this neo-liberal recipe has already ruined many
developing African countries and substantially reduced their social
welfare programs (Garcia, 2013, Balayan,
2017 and Gebre, 2018, Stiglitz, July
2016), some former admirers of Ethiopia’s developmental model are
re-considering the neo-liberal model as their future path.
When Africa had no other choice, it had to implement the neoliberal
or the Washington Consensus-structural adjustment process in order to
borrow funds from the IMF. As a result, it lost a quarter century of
industrialization. As revealed, the SAPs, didn’t restore Africa’s
internal and external macroeconomic stability. Rather, during the SAPs
era, Sub-Sharan Africa experienced a pathetic 0.35% GDP growth.
Politically, the SAPs process merely encouraged authoritarian military
regimes that ignored basic human rights in most sub-Saharan countries (Kofi
and Desta, 2008).
Fortunately, the African continent has been saved
from the disgrace that it encountered during SAPs period. As the Chinese
economy is transitioning through the “Lewis Turning Point,” the cost
of production is gaining in productivities and China is hollowing out of
low-end manufacturing and state-driven Chinese investments. As a result,
China’s investments in Africa are mushrooming (Davis, 2015).
It is imperative to stress that, as Ethiopia has pursued its
developmental state model, China has played a vital role and given impetus
to Ethiopia’s industrialization process. Ethiopia has recorded one of
the fastest-growing economies in the world largely because China has
established cooperative, pro-business investment, which has helped
Ethiopia build fundamental infrastructures (Stiglitz, July 2016; Desta,
While straying from the Developmental State Model
that has helped Ethiopia achieve
such miraculous economic growth, Ethiopia’s
most recent GDP data reveals a slide from 8.7 percent in 2014/15 to
7.7 percent in 2017. As noted in Ethiopia
Economic Outlook on Dec,13, 2018, Ethiopia can attribute this decline
to “…softer expansions in the agricultural and manufacturing sectors,
while mining activity contracted sharply. Meanwhile, foreign exchange rate
shortages plagued dynamics, hampering several sectors…”
More recently, as rampant unemployment, staggering
inflation, poverty, and ethno-nationalistic conflict currently plague
Ethiopia, Ethiopia’s survival as a viable state stands in jeopardy.
Instead of focusing of reviving the economy, Abiy’s regime depends
heavily upon the financial aid of the U.S., Saudi Arabia and the United
Arab Emirates. Meanwhile, Abiy’s regime creates aimless committees to
diffuse the regimes’ fundamental leadership crisis and indulges in empty
Given the economic meltdown, political
uncertainties, and numerous ethnic tensions that prevail in Ethiopia, this
study will investigate and analyze the status of Ethiopia’s development
state model as well as offer suggestions to Ethiopian policy makers for
the future viability of the Ethiopian state.
The article proceeds as follows: Part One analyzes
the economic vitality of Ethiopia’s current developmental state. Part
Two summarizes the main findings of the paper, and Part Three proposes
political and economic suggestions for restructuring Ethiopia’s existing
developmental state model for the foreseeable future.
The Economic Vitality of Ethiopia’s
Current Developmental State model
Ethiopia’s military rule (1974-91) is assessed by almost every major
index of economic growth, it shows Ethiopia in perpetual decline. Due
mainly to poor policies, war, environmental degradation, a rapidly growing
population, adverse external development, Ethiopia’s per capita income
became progressively worse. As persuasively stated by Cole (1992), though
some called Ethiopia the breadbasket of the Middle East, the country
couldn’t even feed its own people (Cole, E, 1992).
However, pursuing the developmental state model
for the past seventeen years, the EPRDF, though not enough to expand the
country’s social services, lifted Ethiopia from decades of slow growth
under socialist military rule to achieve a record of staggering economic
growth. Indeed, the United Nations Development Programme (April 18-20,
2018) persuasively demonstrates that from the demand side of public and
private investment, between 2003/4 and 2016/17, Ethiopia recorded a strong
growth of about 36.3 percent. From the supply side, the value added in
agriculture services and construction
sectors grew by 39.3 percent. Overall, between 2003/04 and 2016/17,
Ethiopia has achieved over 10 percent growth rate per year in its Gross
Domestic Product (GDP).
Though not sufficient for domestic investment,
Ethiopia’s domestic saving has shown a dramatic swing from 17.2 percent
in 2010/11 to 24 percent of its GDP in 2016/17. Consequently, the overall
investment in hydro-energy and the reengineering in infrastructures, such
as building road networks and improvement in tele-density and airports
have greatly contributed to Ethiopia’s economic growth.
In social services (such as education, health,
water and sanitation, as well as infrastructure—i.e., roads, railways,
telecom, and power generation), Ethiopia has demonstrated a phenomenal
growth rate. By 2015, access to universal primary education, health
coverage, and potable water has accelerated by 100%, 98%, and 65%
respectively. Since Ethiopia’s Human Development Index (HDI) increased
by 16% from 2005 to 2011, the country’s life expectancy has risen around
64.6 years. As a result of this miraculous growth in its economic and
social services, Ethiopia’s poverty reduction, as measured by poverty
head count, has substantially declined from 45.5 percent in 2000 to 29.2%
by the end of 2009/10, and 23.5 percent in 2016. Overall, income
inequality as measured by the Gini coefficient, Ethiopia has fallen below
30 percent (Shyumuye, 2017). In summary, when compared with other
sub-Saharan nations, Ethiopia had the best record for reducing poverty per
increase in GDP.
Writing on developmental states, Zhang (2018)
argues that developmental states generally contribute to positive economic
outcomes, facilitate the minimization of social problems, and avoid
dependence on the Western industrial powers. Given Zang’s line of
reasoning, the ruling party in Ethiopia has exploited the developmental
state model to harness political stability, achieve extraordinary economic
growth and transform the country into Africa’s economic-powerhouse.
In other words, given the core matrix of
Ethiopia’s Developmental State model is economic growth, Ethiopia
remains a compelling example of how an African country has achieved a
steady state-directed economic growth for the last fifteen years. In
recent years, however, the Federal Democratic Republic of Ethiopia is
posed with high youth unemployment, rampant inflation, superfluous
extensive foreign debt, and profound environmental challenges.
there are variations in the measurement of unemployment rate, over fifty
percent of young Ethiopians (ages 15-24), with secondary and higher
education in Ethiopia, though willing to work, are either actively seeking
jobs or have given up looking for work (Badalau, 2012). Types of
unemployment generally include cyclical or demand deficient unemployment
(caused by falling output during an economic recession), structural
unemployment (results from a mismatch between training and job placement,
and frictional unemployment (arises due labor turnover or the continuous
flow of workers from one job to other).
By and large, youth unemployment in Ethiopia can
be attributed exclusively to structural factors. Put simply, schools fail
to meet the needs the labor market, resulting in structural unemployment.
Meanwhile, the longer the youth remain unemployed, the more likely they
indulge in illegal activities such as robbery, kidnapping, drug
trafficking, and prostitution. For example, in Ethiopia, the school
systems lack the capacity to provide adequate information on job vacancies
to their students. This inadequacy in employment information has increased
the waiting period of the certified to attain productive employment. As a
result, many unemployed Ethiopian youths, aimlessly roam the streets of
Addis Ababa and other cities and towns (The Ethiopian Herald, Addis Ababa,
April 18, 2018).
The Ethiopian Herald (April 18, 2018) documents how these highly-trained
but unemployed Ethiopian youth—blocked from attaining their goals by
flaws in the system—fall prey to drug addiction, face depression,
vandalize private and public properties, and generally disrupt
Ethiopia’s peace and tranquility.
If the present political upheaval and trends in
massive unemployment in Ethiopia continue unchecked, Ethiopia’s
sustained productivity and economic growth over last fifteen years will
gradually diminish. Also, the wasting of highly trained and qualified
young workers due to structural limitations will deprive the country of
the valuable skills knowledge, and services they could be providing.
By and large, the unemployed youth in Ethiopia who
inadvertently created the opportunity for Abiy to come power have turned
to violence because they see that both the educational system and labor
markets are distressed. More particularly, higher educational institutions
in Ethiopia have seriously failed to meet the challenges of the new
millennium. In particular, the universities and TVET (Technical Vocational
Education and Training) programs have seriously failed to create the
necessary structured experiential learning or internship programs to
provide the graduates with current knowledge and skills. Instead, they
have abandoned their graduates to swim aimlessly, looking for jobs
they’re not qualified to fill (Nwogwugwu and Irechukwu, 2015).
accelerated economic growth, inflation-- a continuous rise and fall in the
prices that consumers pay for a standard basket of goods has remained a
scourge of the Ethiopian economy. With a sustained economic growth,
Ethiopia has been experiencing an unsustainable double-digit increase in
the price of goods that averaged 16.12 percent from 2008 until 2018
(Ethiopia Government Statistics). Overall, the rampant inflation in
Ethiopia is due to demand-pull (the availability of too much money but too
few goods), cost-push (acceleration in production cost), and structural
inflation (i.e., deficiencies in food production with inefficient
distribution system) proliferates inefficiency and disrupts investment and
results in currency devaluation (Desta, 2009, Biresaw, 2013).
More specifically, for the last several years,
Ethiopia has been driven into an inflationary trap of about 15 percent per
annum due the lack of articulation between demand-pull and cost-push
factors, monetary phenomena (qualitative easing or increase in the
quantity of money that encourages imprudence among banks that lend at a
massive scale), and budget deficit. As established by Barro (1996), since
the rate of inflation in Ethiopia exceeds 15 percent of the break-even
point, inflation will most likely damage Ethiopia’s economic growth. The
rise in inflationary pressure generates distortions in the allocation of
resources and reduces the purchasing power of the birr.
Thus, with the current increase in inflation, Ethiopians now suffer from
expected inflation and a loss of confidence in the stability of the
Ethiopian birr. Therefore, if uncontrolled, Ethiopia’s current inflation
will most likely deter savings and prohibit productive investments.
of internal low income and relatively low domestic savings, a
country—provided it can make future payments on its debt—can borrow
funds from external sources, such as bilateral institutions, multilateral
institutions, and international capital markets to gain the necessary
resources for internal capital formations and to harness economic growth.
For example, during the Dergue’s era, the military government relied on
domestic sources (such as the capital of nationalized firms, taxes,
domestic loan,) and external sources (mainly from foreign remittance and
loans from the Soviet Union and other socialist countries) to finance its
military missions and domestic projects (Adugna, 2015).
Therefore, to restore economic growth battered by
civil wars, droughts, and the previous military regime’s mismanagement,
to facilitate social services (education and health) to the vulnerable
groups of the Ethiopian society (African Development Bank Group, 2000),
and to transform the country from central planning to market economy,
Ethiopia has to date borrowed US $63.55 million (i.e., 69 % of the funds
were from the International Development Agency-IDA) from the World
Bank’s soft window. Meanwhile, Ethiopia borrowed an additional 24% of
the funds from the African Development Fund to implement the Structural
Adjustment Program (SAP) from 1993-1996.
Following the loan
period and the full implementation of the EPRDF’s developmental state
model, on the basis of growth expectations, Ethiopia’s external debt
dramatically increased by 41.8%, 26.9%, 20.5%, 27.4%, 31.8%, 34.9% and
33.5%, in 2006, 2008, 2010, 2012, 2014, 2016, and 2017, respectively
(Trading Economics.com, 2018). Due to rapid inflation,
bad harvests, and deterioration of export earnings, Ethiopia’s total
debt service (% of exports of goods, services, and primary income,
including the sum of principal repayments and interest) dramatically
increased from 3.95 % in 2010 to 21.01% in 2016 (IMF, 2016). Similarly,
Atingi-Ego etal, (2017) argue that Ethiopia’s exports in 2016/17
deteriorated “…due to a weak external environment and delays in
completing key export-oriented projects, and the maturing of non-concessional
borrowing contracted in the last 5 years.”
As stated above, Ethiopia has used most
of its external loans on productive projects. Nonetheless, Ethiopia
currently carries heavy debt, either because the overvalued birr might have choked off the country’s exports, the borrowed
funds were mismanaged to run inefficient state-run companies, or they were
invested on over-ambitious infrastructural projects or other capital
intensive projects. Thus, Ethiopia’s
external debt crisis can be systematically attributed to a combination of
imprudent lending (supply side), internal mis-management of borrowed
funds, and international economic conditions that deal with interest rates
on borrowed funds, terms of trade, and the prices of oil imports (Desta,
enhance its capacity to service its external debt, Ethiopia must undergo
macroeconomic adjustments to leverage its export earnings or reduce its
debt burden through rescheduling, refinancing, or spreading its debt
obligations. However, as suggested by Lovejoy (1984), one of the most
innovative strategies to alleviate external debt crisis would be for
Ethiopia to deliberately swap its external debt for sustainability
In other words,
Ethiopia could avoid defaulting on its loans and gain access to further
external loans, provided some philanthropic, environmental non-government
organizations (NGOs) could buy Ethiopia’s loans, helped by private
creditors at substantial discount. Then, the NGOs could negotiate with the
Central Bank of Ethiopia to issue the face value of the total external
loan in domestic currency, or biir,
and earmark the total loan for the environmental protection or
conservation projects stated below.
the years, partly conditioned by the law of diminishing returns,
Ethiopia’s rapid economic growth has simultaneously contributed to
massive degradation (Desta, 2009). Aklilu (2001) argues that environmental
degradation in Ethiopia could be explained by the interplay between
physical environment and population. With the increase in population,
Aklilu states that the limited land holding, mass land degradation, soil
nutrient depletion, and inefficient production techniques play a major
role in explaining Ethiopia’s environmental degradation.
In rural areas, air burning, the use of dung for
fire, the use of dry aquifers, or the overuse use of chemical fertilizers
are the main causes of environmental degradation. In urban Ethiopia, smog
release of carbon dioxide from old cars and outdated industries causes
particular concern. As Edwards pinpoints (2004), through the misguided
application of chemicals, Ethiopia has accumulated one of the largest
stockpiles of obsolete pesticides on the African continent. Specifically,
the use of agro-chemicals such as herbicides, pesticides, and fertilizers
for horticulture commodities—all designed to earn foreign exchange—has
flooded Ethiopia with hazardous waste (See Edwards 2004, and Desta, 2009).
Thus, if Ethiopia is to improve its degraded environment in a sustainable
way, Aklilu (2001) persuasively suggests that it can be “…accomplished
effectively through education to create awareness and shape the capacity
of people’s attitudes in such a way they would use environmental
resources without damaging the resource base and compromise the needs of
the next generation to make use of the same resource base.”
Summary, Conclusion and Policy
by the miraculous transformation achievement of Taiwan and South Korea’s
developmental state model, in 2001, Ethiopia adopted and thrived by adjusting the East Asian state-led Developmental
State Model to reflect its own historical conditions and specific context.
As a result, the Ethiopia’s Developmental State Model was designed to
have a preponderance of discretionary intervention and control over the
market to allocate its scarce resources and influence toward economic
growth and industrialization. In short, Ethiopia adopted its Developmental
state model with the belief that the state economic intervention could
enhance economic growth and wipe out poverty. Specifically, the Ethiopian
state exerted strong control on natural resources, land, infrastructure
development, airways, credit, agriculture, manufacturing and investment,
foreign trade, foreign currency transaction, and on the international
movement of capital by both firms and individuals.
In addition, to address the wave of globalization
and adjust to the post-2005-elections political crisis that arose between
the ruling party—the Ethiopian Peoples’ Revolutionary Democratic Front
(EPRDF)—and its opposition, the EPRDF shifted its future ideological
orientation from revolutionary democratic centralism to a Democratic
Developmental State. Modifying itself from a vanguard party to a
transformation belt, the EPRDF Party began encouraging the proliferation
of think tanks that included elements of political parties, government
departments, corporations and philanthropists.
In economic terms, the ruling Party promised to
pursue a freely competitive market system (African Development Bank Group,
2011, and Lefort, 2012, de Waal, 2018). To
induce direct foreign investment, the ruling party invested heavily in
rebuilding its infrastructure. Furthermore, the Ethiopian state promised
to provide tax holidays, tax relief on imported capita, various investment
incentives, and to allow foreign ventures to lease virgin farmlands
At the time, Ethiopia recorded the fastest-growing
economy, and it emerged as hub of economic engine in sub-Sharan Africa. In
2015, an increasingly lazy and inept EPRDF began to drag the country into
political unrest. Protests by the angry and increasingly unemployed youth
cost the ruling party its power and control over Ethiopia’s landscape.
Either by design or default, these popular protests opened the door for
Abiy to become not only the chair of the EPRDF, but also Ethiopia’s Prime
Minister on April 2018, (Gelan, 2018, Desta, Ethiopian Observer, 2018).
To the surprise of some party members, PM Abiy
started took an ideological turn after he became Prime Minister. In
opposition to his party members and the Ethiopian
Parliament, PM Abiy started unliterally reversing the country’s
long-held developmental state. Imagining that implementation of
liberalization and privatization could succeed and using the dwindling
foreign-exchange reserves as an excuse, PM Abiy ordered Ethiopia to start
opening its doors to world investors to purchase publicly-owned stocks.
As stated above, Ethiopia’s Developmental State
Model has created miraculous
economic growth for the last fifteen years. And yet, as if PM Abiy had not
been part of the old process, he currently ridicules and and openly
questions Ethiopia’s economic successes.
However, due to political instability, ethno-nationalistic conflict, and communal strife’s, the
Ethiopian topography has made it almost impossible for citizens and
merchants to move freely from one ethnic-zoned region to another. In
addition, exporting of processed goods by the recently erected industrial
parks and competitive firms to foreign countries has become unmanageable.
Domestic merchants and entrepreneurial farmers have also struggled to sell
their products in Ethiopia’s other regional states. Consequently, a
gradual decline in the GDP, rampant poverty, inflation, external debt, and
unemployment have led to an inevitable
demise of developmental state model.
fifteen years, Ethiopia’s economic growth has enabled it to become
Africa’s greatest success story. However, Ethiopia now faces a decline
in GDP, rampant inflation, and gradually rising unemployment. If
the recent wide-scale economic crisis is not addressed immediately, it
could ultimately disrupt Ethiopia’s political legitimacy. Instead of
using the achievement of the existing Developmental State model as a base
to create future harmony, PM Abiy’s regime is undoing past successes and
sheltering Ethiopia under the hegemony of the U.S. and U.S. Arab states
allies, guided by the Washington Consensus paradigm. As
chronicled by Stiglitz (2016), the neo-liberal model has damaged the
economic health of many nations. Given the experience of other developing
countries, observers can reasonably predict that if Ethiopia pursues the
neo-liberal model, Abiy could harm his country politically, economically,
Instead of sticking to an ideological premise that
politics will determine a large aspect of the Ethiopia’s economy, it is
high time that PM Abiy should follow the advice of Bert Lance: “If it
isn’t broke, don’t fix it” (May,1977). Ethiopia currently faces an
abysmal economic decline, political upheaval, and ethnic strife because
the country’s chief engine of growth—Ethiopia’s Developmental State
Model—has been cracking due to administrative obsolescence.
Tragically, the Ethiopian federal government has
remained indifferent when residents, because of their ethnicity, are
butchered, killed, harassed, and beaten with batons. Angry protesters are
burning down churches and residential homes. Innocent victims who manage
to escape on foot to other regions are found starving while sheltering in
crowded churches, mosques, or other dilapidated buildings. Meanwhile, as
ethnocentric outlaws and myopic bandits deliberately block inter-regional
roads, Ethiopia’s Federal Government seems to turn a blind eye.
Consequently, merchants, farmers and various entrepreneurs from local
areas are prevented from crossing inter-state roads to offer their
commercial operations. Sadly, starvation has become rampant in many
In its current state of anarchy, where citizens
literally slaughter one another, Ethiopia has become number one globally
in terms of internally displaced people and human misery (Abraham, 23 Nov.
2018). Given this horrible truth, PM Abiy’s regime has no choice but to
take responsibility and enforce peace, stability, and legitimacy so the
Ethiopian people can move freely between regions and interact peacefully
without fear of atrocities.
To honor the Federal and state governments’
promises to foreign investors who have invested in the various Industrial
Parks by bringing new technology, acted as incubators for new
entrepreneurs, and promoted just-in-time export of the internally produced
products to the outside world, PM Abiy’s regime should realize the
economy’s hard infrastructure (road network, buildings, power supplies,
water, sewer systems, railways, airports, internet services), and the soft
infrastructure (educational, legal framework, security, labor force) are
malfunctioning in some parts of the country.
Hoping that peace and tranquility would thrive in
Ethiopia—and using the same methods Japan, South Korea, Taiwan,
Malaysia, and other countries undertook to tackle the “Asian Crisis of
1997” (Ginsburg, 2002)—PM Abiy’s regime must conduct a systematic
analysis of the Strengths, Weaknesses, Opportunities, and Threats (SWOT)
for Ethiopia’s Developmental Model. The results of the SWOT analysis
could then be used as foundational base to sagaciously redesign an ongoing
dynamic adaptive post- developmental model (Cai, 2010). Furthermore, using
this type of analysis, Ethiopia could skip shock therapy and smoothly
traverse the era of globalization to achieve dynamic, long-term growth.
Modifying the premise of Ethiopia’s existing
Developmental State model so the embedded state autonomy is primarily
tailored to achieve economic growth, PM Abiy’s regime must surge forward
and apply a competitive market; this market must be driven by sweeping
privatization that Ethiopia could take advantage of backwardness in its
industrial upgrading process (Lin 2011). Given
this, future Ethiopia could design its post-developmental reform to
incorporate the three pillars: i.e., the economic, social, and
environmental factors sustainable development.
In other words, from the core contents and
strategies of the current Developmental state model, PM Abiy’s regime
doesn’t need to sell the stocks of some of the profit-making state-owned
enterprises (SOEs), such as Ethiopian Airlines, Ethio-telecom, and others
to private investors because they have a solid history of surviving tough
competition in the global markets. However, to minimize the monopoly power
that these big companies have long entertained, as state-owned
enterprises, in tandem with market liberation principle, they must be
encouraged to compete seriously with other global investors. That is, PM
Abiy’s government must gradually reduce the various domestic subsidized
credits and foreign currency that the SOE’s monopolies have been
collecting at no cost from the government budget, as well as the
artificially repressed interest rate loans they accessed for many years.
It is time that the SOE’s monopolies be charged to pay the
market-determined interest rates for funds borrowed for investment and/or
to lower operational expenses.
To transit from the patterns that prevailed during
the earlier developmental state period to the proposed post-reform state
with a well -functioning market economy, PM Abiy’s regime would have to
remove the structural imbalances and distortion in finance and natural
resources (except for the command-quality standards and control-negative
externalities regulations) (Cai, 2011, Maman and Rosenhek, 2012).
As other developmental countries have done,
Ethiopia could form a hybrid paradigm where some developmentalist
practices coexist with the prevalence of privatization policies to harness
a free market operation. Thus,
the Ethiopian state could strategize the:
of joint venture investors, joint production, and wholly-owned green
investment (with new production facilities), facilitating cheap inputs,
lower operational costs, liberal exchange rates, and providing incentives
like lower taxes and free land;
of investors in telecommunication, power, internet services;
entry of foreign banks
to invest in Ethiopia;
privatization of the
state-owned commercial banks;
efficiency of market
forces to determine interest rates and the exchange rate on the Ethiopian
upgrading of the
regulatory and supervisory capacity of the National Bank of Ethiopia to
facilitate efficiency in the banking sector (Bezabeh and Desta, 2014);
development of small
local banks which could extend credit to small household farms and small
and medium-sized manufacturing enterprise; and
depleted urban public houses (nationalized by the Dergue to fulfill
the pillars of socialist welfare ideology that
propagated that housing is not a commodity with an exchange value, but
must instead be provided by the state citizens at a nominal rent); and
sell them to current residents at approximately
25 percent of their monthly income amortized by public banks for
thirty years. The
privatization of public houses could not only help refurbish the
but also improve the infrastructures (i.e., pipes, sewer systems,
supplies) that residents lack. The
privatization of public urban houses could also
harness employment and contribute to economic growth.
addition to the current, meager, urban safety nets designed to help
unemployed youth search for jobs, PM Abiy’s regime must reform the
country’s educational quality in order to prepare graduates with skills
suited to the modern labor market, in lieu of the fact that employment is
a cardinal human right, as stated in my book (2017) Re-thinking
Ethiopia’s Ethnic Federalism:
in collaboration with
Technical and Vocational Education and Training (TVET) institutions, the
current government must integrate an “Employer of last Resort” (ELR)
model to retrain unemployed youth on sustainable projects and expose them
to work in community-based, environmentally sensitive public services
across a wide range of institutional settings.
To control the
inflationary pressure in Ethiopia, the fiscal budget must be tightened.
The National Bank of Ethiopia must be immune from political pressures in
order to tighten monetary policy by auditing financial institutions; this
would maintain reserve requirements and help encourage more prudent
To achieve optimal
sustainable development, and thereby feed its people, Ethiopia must focus
on an integrated, environmentally sensitive, and cooperative
agro-industrial style of development. By improving its environmental
quality, Ethiopia can venture into the proposed post-developmental state
era. However, to adopt a green development path, each state in Ethiopia
must consider green technology development necessary as engines for
economic growth, employment, and innovation ( Mazzucato, 2013 and Ricz,
political cadres recruited from various ethnic groups run the Ethiopian
Government. To make it efficient, governmental recruitment needs to be
intensively competitive. Once recruited, in addition requiring each
recruit to undergo a political orientation, government employees must act
as autonomous civil servants—primarily recruited on merit and obliged to
their institutions as opposed to their own political ends.
Instead of recruiting state employees from a single ethnic group or
based on political connections, PM Abiy can best serve the public by
hiring people with technical expertise in order to professionalize the
federal state bureaucracy and fully realize Ethiopia’s
However, for fundamental change to occur in
Ethiopia, the existing mono-party system must give way to multi-party
system. With the new political atmosphere, Ethiopia’s journey toward
autonomous democratic federalism can become a reality if it redesigns its
form of federalism and practices predictable and transparent democracy
incorporating adequate checks and balances. For example, the
decentralization system promulgated by the Ethiopian government in 2001, a
democratic self-rule of woredas could serve as the organizational structure for Ethiopia’s
federal system. Transferring political authority to local government
through the establishment of democratically elected local government would
propel direct citizen participation and accountability in Ethiopia.
Therefore, as this author suggests (Desta, 2017),
to implement true democracy, the election system in Ethiopia must follow a
proportional electoral system that allows multiple ballot choices to all
Ethiopian citizens. Under this broad electoral spectrum, no Ethiopian
eligible to vote can be left out. Proportional representation also
minimizes the rampant ethnic tensions in Ethiopia. Therefore, with
adequate public participation using the proportional electoral system,
Ethiopia would undoubtedly remain stable as it marches peacefully toward
the proposed post-development state paradigm.
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