Amazing Africa & Incredible India

By Tesfu Telahoun

The 4th India-Africa Poject Partnership Conclave ended on Friday March 21, 2008, after a three day session, closing with a special valedictory adress by Shri Pranab Mukherjee, External Affairs Minister of the Government of India.
The Conclave was highly successful in meeting its stated objective of bringing closer Indian and African co-operation in a variety of sectors.
The 4th India Africa Project Partnerships specifically aims the following:
Local value addition to the abundant natural resources
The need to make available goods and services at affordable prices particularly for semi-urban populations.
To augument local production to meet the demands of the growing middle-class consumer market and reduce dependency on imports.
Need to generate employment through replication of the Indian model in agriculture and small and medium sized business development.
In his valedictory address, India’s Minister of External Affairs, Pranab Mukherjee, expressed his pleasure at being present at such an important gathering and said:
“I am particularly delighted to have the opportunity of speaking at this conclave with Africa in the run up to next month’s India-Africa Forum Summit, which India will have the honor of hosting. I am confident that the Summit will give a renewed thrust to the centuries-old partnership between India and Africa. We are grateful to the governments of Africa for their response to this initiative and I take this opportunity to thank them once again for their support.”
Recent years have seen dramatic progress in India-Africa relations at all levels. India and Africa are cooperating in a wide spectrum of sectors and this trade is estimated at over 25 billion USD at last count.
The two sides are building on various commonalities and India’s model to rapid development is becoming increasingly attractive to a new and emerging Africa. Commenting on this, arena the External Affairs Minister affirmed, “Today, Africa is witnessing far reaching changes. In recognition of this, India and the countries of Africa have for some time now, been in the process of providing a contemporary character to our relationship,” and added,
“……..both sides are home to a wealth of bio-diversity, substantial natural resources and hard working populations. What we need is to identify areas of our core competence and match these with the economic and societal needs of a particular nation. Knowledge sharing, knowledge dissemination must be a vital componjenet of our co-operation.”

Imported inflation + price peak = economic growth?

By Abiy Demilew, Tewodros Kebkab, Tagu Zergaw

Kummel Kalid, 27, has been the whole day since sunrise in his little shop close to Bole Medhanealem. He spent most of his life shop keeping until he emerged with his own little shop 7 years ago.
As everyone else, he is struck by the food price hike and seems confused as he watches the Prime Minister explain the issue in economic terms.
“I’m really confused between development, growth and food prices rising time to time. If our economy is growing then how are the poor benefiting from it?”
Kummel is not the only one; many people are confused about the problems they are facing in their lives and about the explanations given by the leadership.
Prime Minister Meles Zenawi, in his televised briefing to parliament, elaborated on the major macro and micro-economic features of the recent escalation of food prices and the inflationary situation the country is facing. He also addressed the issue in an international context and strongly marked on how the international business and economic reality is affecting the Ethiopian economy.
One of the indications the PM underscored as an international impact on the country’s economy was imported inflation.
A Nigerian economist residing in Addis says; imported inflations are justified in a high price level growth abroad. In a broader sense it is a type of inflation whose causes lie in the external relations of a national economy. The transmission channels of import inflation proceed from firm rates of exchange between the domestic and foreign country.
“First of all the domestic enterprises receive foreign currency for their exports. If the rate of exchange between both countries is fixed, then the central bank must exchange the accumulated foreign exchange to the existing course in domestic currency, whereby the money supply rises. Since no higher material goods offer faces the increase in money supply, domestic prices rise eventually. This is how inflation is imported from a foreign country,” the expert explains.
A second transmission channel of imported inflation on the domestic economy comes by the imported goods themselves. For example if there are higher petroleum prices and as a result this leads to an increase in wages, it can result in an inflationary spiral and eventually end up in higher domestic inflation, according to the expert.
Contextualizing to the Ethiopian situation, he describes; “Since the Ethiopian economy depends so much on the dollar, it means that higher prices of goods due to inflation would reflect on goods imported domestically. Again if prior to importation of goods the birr had depreciated against the dollar, it means that the cost of importation would increase and therefore it will affect domestic sale price of the imported goods. If there are import taxes, then the situation gets exacerbated because taxes on the goods imported would further cause the price of imported items to further sky rocket.”
The impact of food price increases on inflation
Dr Joachim Von Braun is one of the leading economists of the World Bank and currently is Director General, International Food Policy Research Institute.
“The food price increases impact strongly on the general levels of Inflation in some countries. If not carefully assessed, Central Banks and Governments may respond with inadequate measures. The recent increase of the Consumer Price Index in China, for instance, is about 80% due to food price increases. General monetary and exchange rate policies may not be effective to address these specific food price increases, which require mainly investment action for increased production,” says Dr. Joachim responding to Capital from his bureau in Washington DC.
Explaining the actions needed to be taken, the expert details; effective and coherent actions are urgently needed to help the most vulnerable populations cope with the drastic and immediate hikes in their food bills and help farmers meet the rising demand for agricultural products. In the short run, developing-country governments should expand social protection for the poorest people-both urban and rural.
“Secondly, Governments should increase their investments in agriculture, rural infrastructure, and market access for small farmers in the interest of achieving long-term agricultural growth. Rural infrastructure and other investments. Aid donors should also expand development assistance to agriculture, rural services, and science and technology, given that more investment is needed in these areas on a significant scale,” Joachim explains.
The impact of imported inflation in a developing economy like the Ethiopian
“It results in higher prices of imported goods which erodes the purchasing power of citizens making them look much poorer since they are not able to buy goods imported in the face of rising prices. Again it puts pressure on the domestic currency to depreciate relative to foreign currencies,” underscores the Nigerian economist.
If the amount of grain exports from Ethiopia is larger than the amount of grain imports, then the balance of payment of Ethiopia improves, which is a positive impact. However, if the amount of grain import exceeds that of export, Ethiopia then experiences an economic condition known as worsening terms of trade or TOT, which is a negative effect, according to the expert.
According to a recent study, the food situation has been exacerbated by devastating snowstorms in January that have killed farm animals and damaged crops across a large part of the country. Partly because of the storms, China’s food prices in 2008 have risen 18 percent, higher than the 13 percent increase of grain commodities in Indonesia and Pakistan, and well above the 10 per cent increase in South America and other developing countries.
According to the Beijing Municipal Food Office, Beijing current daily sells 1.1 million kg of pork, 770,000 kg of beef and lamb, 2.5 million kg of eggs daily. More than 80 percent of the meat in Beijing comes from other cities. Livestock and poultry products are considered high-risk and have always been the focus of food safety.
The world’s food stock situation
Based on his recent study, Dr. Joachim explains “The world has currently the lowest level of food stocks in storage since about 30 years ago. We are short of food and the markets are very tight and nervous about the situation.”
For instance, grain prices and the price of soybeans are at record highs. Just from December 2007 to January 2008, prices have more than doubled. This is good news for farmers who have something to sell but also bad news for most of the consumers in rural and urban areas, including in Ethiopia, the expert reveals on Capital’s exclusive.
Priorities in mitigating challenges
Firstly, in the long run as a top priority, we have to invest on new initiatives for innovation in science and research in order to increase productivity in agriculture also in Ethiopia. We must think about the food system in the long run, according to Dr. Braun.
The second top priority is making markets work even better. Globally, it is essential that countries are not blocking their borders to each other. When we have shortages of food worldwide, the world must trade more not less. But unfortunately many countries in the world are seen doing the opposite; they close their borders to each other with the idea to feed their citizens first. That is very understandable and at first impression, it is right for the governments to feed their citizens first.
“Unfortunately, from the global perspective it is wrong because if countries continue blocking their borders, prices internationally grow higher and higher, affecting especially poor countries that depend on imports suffering the most. What we need is a global consensus for continued and extended free trade. For instance in Ethiopia, its important that market information is improved and financing of trade is readily accessible.

“Governmental and non-governmental organizations have to take the responsibility of creating job opportunities for women like us. Not only by creating educational access but also job opportunitie,”