‘Govt.
continues sending mixed signals,’ Eyesus Work Zafu- ‘Not every failure
of private sector can be blamed on govt.,’ Tadesse Haile
By our staff
reporter
Friedrich Ebert provided a forum at the Sheraton Hotel where the Vice
President of the Addis Ababa Chamber of Commerce and the State
Minister of Trade and Industry debated “the importance of the private
sector in the economic development” as a continuation of the dialogue
between the private and public sectors.
Eyesus Work Zafu, VP of the AACC and Board Chairman of the United
Bank, and State Minister Tadesse Haile of Trade and Industry faced off
at the high table flanked by moderator Teshome Kebede, President of
the Manufacturing Industries Association and Hartman Hess of Friedrich
Ebert Stiftung.
Miniscule private sector
How important has the private sector been for the economic development
of the country? A question that need not be asked, perhaps… “The
indigenous non-peasant private sector” as Ato Eyesus Work likes to
call it, is comprised of a relatively small and rather beleaguered
sector of the Ethiopian economy. It cannot be said to have had a
meaningful impact on the economy. Burdensome controls have been put on
it and it has to deal with red tape, bureaucracy, price control and an
assortment of other obstacles.
Having cut down any delusions that the public may have concerning the
private sector he went on to detail the problems associated with
government policy and doing business in Ethiopia.
To begin with, the cost of starting and doing business is very high
and land is expensive. Government is still the holder of large assets
and it is by far the largest rent collector of them all, and continues
to be the largest creator of wealth and deliverer of a great portion
of the goods and services thru state owned enterprises.
The government continues to send mixed signals when it comes to
private enterprise. “It can talk the talk but so far it has not been
willing to walk the walk,” Eyesus Work ponders.
The foreign stakeholders are pathetic apologists when it comes to
criticizing the government’s economic policies. Only a couple of
ambassadors seem to lend support to the non-peasant private sector.
Only they seem to tell the government that it should stay out of the
private sector.
It is the miniscule private sector, which seems to forge ahead in the
struggle for policy changes for a stable financial center, modern
communications and a secure title to land. But compared to the private
sector the government still holds colossal assets. In the present
atmosphere, the private sector is small, weak and its prospects do not
hold great promise.
In addition, there is a lack of trust of the private sector. Officials
do not want to be seen with the private sector and government is
mostly listening to its own voice. It is like the old days when
financial success was despised. It is in this cultural atmosphere that
the private sector hast to operate. Misunderstood and mistrusted as if
we come from a different planet, he said.
“Government should engage in confidence building and in capacity
building and come to the support of the private sector so that it can
become the prime mover of economic development,” Ato Eyesus Work
concluded.
The view from the other side
Following Ato Eyesus Work’s description of the status of the private
sector vis a vis its contribution to economic development of the
country, it was Ato Tadesse Haile’s turn to express his point of view.
The Minister started by emphasizing the need and importance of
government involvement at the present stage of economic development.
To the Minster, what ambassadors said or did not say was neither here
nor there, since their knowledge of what the government is doing is
circumstantial at best. World development reports were more to the
point than individual opinions at any rate. The Harvard University
report, for instance, could have shed better light, he argued.
Individual opinions are misleading.
Having said that Minister Tadesse gave a familiar historical
perspective to his argument to follow. Prior to the present
government, during the Derg, all economic activity was directed by the
central government and practically the whole of what made up the
private sector was confiscated. What little private enterprise existed
was completely destroyed.
The present government had to transform this situation and it could
not be accomplished by declaration alone. But since then trade is
completely liberalized, prices are deregulated and are now determined
by supply and demand. Labor law is revised and customs tariff was
gradually reduced from 230% to 50%, 40% and down to 30%. In fact, he
said, the weighted average of customs tariff today is around 17.1%.
The legal framework under which the private sector operates has also
been transformed completely, he asserted. New institutions like the
Investment commission, Export Promotions Agency and Standard and
Quality Control Authority were introduced.
Macro-economic stability has been achieved and growth has been at a
healthy average of 6%. Inflation is under control, below 5%, all
because of the prudent management of the economic system by this
government, he argued. Foreign exchange rate too has been stable which
is a good indicator of a healthy economy.
Tadesse then pointed what he termed as social indicators that lay good
and stable foundation for growth of the private sector: Access to
education has grown from 20% to 70%; health services have improved by
15%; and access to potable and safe drinking water has improved
considerably.
In addition, he said, power has been decentralized allowing the Region
States to plan their own economic development and implement them.
Land too has been made available at a very cheap price for
manufacturing and agriculture and financing is made available with
three years grace period, 7.5% interest and with no collateral, to be
paid back in 10 years.
The Investment Commission has now established a true “one stop shop”
where registration, licensing and even work permits are issued to
investors.
But this is not to say that further improvement is not necessary but
all this things cannot simply be discounted and the private sector has
to take ownership of it shortcomings. So not every failure of the
private sector can be blamed on the government, which has, in fact
created an enabling and supporting environment for the private sector.
Derg not the benchmark
Ato Eyesus Work countered by stating that the Dreg cannot be used as a
standard. Anything is better than those terrible days of command
economy. If the Derg is the benchmark, he said, we have serious
problems.
He pointed to the properties that were confiscated by the Derg and
still remain in the hands of the present government. This property
could become collateral today, if it were returned to the private
sector, as it should be. It could be used to start new businesses or
finance the expansion of the old, but they languish in the hands of
this government.
Although it is true that the private sector has failed to make a real
difference in the growth of the Ethiopian economy, the government can
take some affirmative actions in support of the private sector and
greatly improve its ability to make a real difference.
As it stands, wealth creation and accumulation by the political elite
and their business organizations is, in fact, the private sector.
A stalemate or an understanding?
In the end, judging from the cordial handshakes and appropriate
smiles, Minister Tadesse Haile and Ato Eyesus Work Zafu, after a
rather lively debate seem to have agreed to disagree in a classical
stalemate which shade some light in the importance of the private
sector in development and the part that the government has and could
play.
Friedrich Ebert has been supporting the private sector particularly
the National and Regional Chambers, the Ethiopian Manufacturing
Industries Association and the Ethiopian Employers Federation to
develop and enhance their capacity to improve mutual understanding and
to establish a shared agenda between the government and the private
sector. |
Tuesday
April 13' 2004
