Capital sat down with Kebour Ghenna, former President of the Ethiopian and Addis Ababa Chambers of Commerce and current Executive Director of the Pan African Chamber of Commerce and Industry to discuss about his views on the current economic situation of the country. Excerpts:
Capital: A year after the advent of Prime Minister Abiy Ahmed to power, which direction is the economy heading?
Kebour Ghenna: When it comes to the PM’s economic policy nothing is clear. He has yet to put his agenda for public scrutiny. The speed the PM has shown in changing the political landscape of the country is yet to be seen in the economic field. He should perhaps consider putting in place an economic team with diverse expertise and background to help him put in place ambitious, even radical economic policies. To date the only modest but concrete reform I can mention is the one relating to the partial opening of the logistics sector to foreign investors and operators, otherwise on the big issues – privatization, liberalization, land policy etc., the PM has only promised to bring changes. As a whole the direction of the economic reforms remain unclear and difficult to predict.
Capital: What would you like changed?
Kebour: I would like to see a strong system of checks and balances, and a parliament that debates, deliver results and decisions within a deadline. One man show should be avoided by all means.
Capital: You seem to favor the development state model, while the PM and many opposition leaders for that matter, seem to lean towards embracing liberal principles.
Kebour: For me the concept of ‘development state’ means advancing societal change. It’s about changing the very contents, make-up, and distribution of the country’s economic pie, as well as growing its size. The problem is how to carry out such intensely complex task, how to manage and coordinate it. Now liberalism broadly states that this will happen spontaneously with a free market. We all know this is not true.
I would argue that development does not happen solely of its own accord, and certainly not with the speed and continuity that is required if a real and sustained improvement in human welfare is to be achieved in the course of a generation. Let me add that an effective Development State requires a particular mix of politics and institutions that can create, maintain, and deepen democratic structures and shape developmental outcomes in both productive and equitable ways.
Capital: Ethiopia has experienced and still is experiencing high growth rates, is this going to continue?
Kebour: All the major economic and development institutions write that Ethiopia’s economic growth will continue. IMF estimates show an 8.5% growth for 2019, I wonder if this forecast is for real. With government cutting investment, the private sector struggling to keep itself afloat, shortage of forex, declining exports, and fall of commodity prices, I don’t see where this growth is coming from.
Capital: There is talk of privatizing Ethiopian airlines, Ethio telecom, and all the large public companies, what are your views on such policies?
Kebour: I don’t know if privatizing Ethiopian will make the company more efficient. Will the private operator add more fleet, more destinations, increase employment, make it safer? I doubt it. Regarding Ethio telecom it’s probably effective to put in place the regulation regime before rushing towards privatization. Issuing operator licenses to private sector new entrants, or even a more restricted way permitting joint ventures with Ethio-telecom, should be the right starting point.
You see, the purpose of privatization is presumably to increase the welfare of the community by getting rid of regulated monopoly offering a narrow range of services, to an open marketplace of great variety that offers affordable access to all. The assumption that privatization is a necessary or desirable part of the process towards achieving that goal is not a given, and many studies attest to that.
For me the underlying issue is whether the privatized service or asset can operate in a competitive market. If it does or if it can, there is probably no need for continued governmental involvement. By the way, the simple transfer of ownership from public to private hands will not necessarily reduce the cost or enhance the quality of services.
Capital: How about the financial sector, do you think the government will open the sector?
Kebour: I think it will, perhaps in four or five years. The government has already opened some areas to foreign financial entities, namely leasing services and the fin-tech areas. I can see this trend continuing.
Many people expect a rush of foreign banks into Ethiopia if the sector is open, I don’t see that happening, especially if these foreign banks are only allowed to operate the way local banks are currently operating. Many also believe that there will not be any foreign exchange shortage if foreign banks are allowed to operate in the country. That’s not necessarily true. Other factors including balance of payments developments, the balance of trade, financial reforms are critical provisions. Anyway the country’s regulation regimes should first be ‘modernized’ before anything substantial could happen.
Capital: Do you think the Birr will be devalued?
Kebour: If it will, the government will not announce it. Just follow the official buying rates of the Central Bank, you will note the Birr has been losing ground for a while.
Capital: Finally how do you see the political changes taking place in Ethiopia. Also your final thought on Addis Ababa City Administration’s recent ruling regarding condominium’s allocation?
Kebour: We’re heading towards dangerous waters. Dr. Abiy and his team have obliterated the Front, meaning EPRDF, without putting in place a viable instrument to run the federal government. Today the constituent states of the Federal Republic of Ethiopia seem to have de facto split apart. The parliament does not entertain much debates on critical issues, and too much power seems to be going towards the PM. In the current belligerent atmosphere I don’t know how the individual regional parties can come together to maintain a Pan Ethiopian Federal Republic. The PM has to work hard to encourage open debates in parliament. But citizens and civil society organizations have also to do their parts.
As for Addis Ababa, it was a case of EPRDF at its worst. Chaotic, autocratic, and opaque decision making process. The Mayor could have done better at managing the issue. Trying to appease one group by taking unexpected decisions has certainly disappointed all those who have trust in this government.