Ethiopia’s Course of Development in the Eyes of Mark Lowcock

 

Last week, Mark Lowcock, the Permanent Secretary of the UK Department for International Development delivered a public lecture at Addis Ababa University at the Faculty of Business and Economics. The lecture had a theme, ‘Economic Development: The good news from Ethiopia and what might make it better’.

“It is always a source of wonder for me how much the country has changed. I know how frustrating it is for Ethiopians that views of your country are still shaped by the terrible famines of the 1980s. Too many people wrongly think that Ethiopia is still suffering in the same way,” said Mark Lowcock.

The strides that Ethiopia has made away from poverty and famine, towards development and shared prosperity, make Ethiopia one of the world’s great development success stories of the last twenty years, said Mark Lowcock. In the last 30 years life expectancy here has increased by 50 per cent and the country is on track to meet most of the millennium development goals.

“You have achieved the infant mortality goal two years early,” Mark said. “Economic growth, in double digits, has been impressive. All the more so because, unlike other parts of the continent, it has not been driven by commodities alone. Per capita income has doubled.”

The major theme of the lecture was what drives inclusive growth and how best manage the transitions that growth may bring over the next 10 years. It was mentioned that it was so because, firstly, Ethiopia is already booming. But there are many questions that need to be addressed as there is still much to do. How can Ethiopia sustain its success? How can the country adapt to the changes which will come in its wake? In addition there may be useful lessons to learn from other countries too. Thus, adjusting to the challenges that transformation brings is just as important as sustaining growth.

The second reason is because of the fact that UK’s partnership with Ethiopia needs to adapt and change too. “This is our largest development program in the world. We are incredibly proud of the things we have helped Ethiopia to achieve to date. We want to be here for the long-haul. But we would like our relationship to change over time from a donor-recipient one to one of import-export and equal partnership on the world stage, on issues that affect us all, like climate change, world trade and counter-terrorism,” said the Permanent Secretary.

As to him, the UK wants to expand its work on economic development in Ethiopia. Mindful that in the long run, it will be the private sector development that will lead the process of job creation and provide the tax base for social spending and public investment by future generations.

Ethiopia has very clear ideas about where it wants to be by 2025, and the best way to get there. Every country grows differently, and finds its own path, the Permanent Secretary emphasized adding “but the common features of countries that have successfully transformed themselves. They are integration into the global economy, macroeconomic stability, high saving and investment rates, importance attached to property rights and letting markets allocate resources as well as the importance of committed, credible and capable governments as stated by the Commission for Growth and Development, set up by the World Bank in 2008 by looking at 13 success stories of sustained and transformational growth to see what feature they shared.

“With nine of these thirteen countries being East Asian, I think the ingredients have particular resonance for a country like Ethiopia,” he said. The first of the features which is integration into the global economy is characterized by the willingness and ability to import ideas, technology, and know-how and exploiting global demand.

He stated that Ethiopia is moving towards this kind of integration and publicly set a target to join the WTO. It has a rising and diversifying export base. There is also a booming services sector, to which energy exports could soon become a major contributor. And then again, foreign direct investment is being actively courted. However, said Mark, inward FDI flows have not yet matched the levels of other parts of Africa.

Regarding macroeconomic stability, he said that inflation would deter savers and threaten long term goals. “The Government has recently taken action to get inflation back under single digits and there is not the history of macroeconomic instability we see in much of Africa,” he added.

A key pillar of the success of the East Asian tigers was their farsighted decision to forgo consumption today in order to pursue higher levels of income in the future. Whilst savings rates have increased in Ethiopia in the last couple of years, they remain lower. Over the last five years, it has averaged less than 10 per cent of the GDP.

Together with the importance attached to property rights and letting markets allocate resources and the importance of committed, credible and capable governments, the five ingredients are a useful way of looking at Ethiopia’s progress and future choices, he noted.

It was mentioned on the event that it is also important to think about the way the world looks to those making important decisions on whether to consume or invest – or often whether to invest in Ethiopia, or somewhere else. He said the investment climate ie: the rules, procedures and norms that underpin how business in done. For instance, how much it costs to register a business, how long it takes to pay tax and the likelihood of being asked to pay a bribe when you do.

The final part of public lecture was on how to managing transitions. The Permanent Secretary said some changes countries face are inherent to the process of growth and rising incomes. Regarding demography, he said, Ethiopia has a young population: 85 million today and set to rise to 150 million by 2050. The median age of Ethiopians is already only just over 16. This would come with both challenges and opportunities.

This youth bulge has often been called a ‘demographic dividend’, with the majority of the population in work, rather than needing looking after. But it also creates pressures for service delivery and pressures on the labor force tomorrow. At some two million new entrants to the country’s labor force every year, that is more than the total number of people currently employed in the formal private sector, he emphasized.

The other transition which is linked to both structural change in the economy and demographics is urbanization. Ethiopia’s population remains overwhelmingly rural, he said adding, but urban centers are growing quickly….no country has advanced to middle income statues without significant urbanization. But still urbanization comes with both opportunities and challenges as urban centers are crucibles for innovation and specialization, they also causes upheaval and change, as to him.

The third transition is that as countries grow and its population gets more educated, wealthy and urbanized, history suggests that ways for that population to express their views openly and freely get ever more important, the Permanent Secretary stated. The final one is increased reliance on domestic revenues and other sources of finance.

He also noted that the UK is in this partnership for the long haul. “As Ethiopia’s development accelerates, our support needs to evolve too…we have begun our shift towards economic development already.”

Following, Mark held discussion with the University’s academic community on capital flow, job creation, equity and inequality, human development and rights, democracy, good governance the interests of UK overseas and the likes and responded to questions raised by students and instructors.

Regarding the question that what is behind UK’s motivation for supporting Ethiopia and other countries the Permanent secretary responded saying, “the first is moral responsibility to eradicate poverty while the second is the fact that as the UK has an open economy, progress in other countries will help our national interest.”

On the question of capital inflow he responded that the long term solution is to be an attractive location. On equity and equality, Mark noted that policy makers should ask the people what they think about this issue and come up with a solution. Concerning the question on human rights he responded that “economic growth comes with more freedom and I hope that policy makers take this in to consideration.”

Sourced here:  http://www.ethiopiainvestor.com/index.php?option=com_content&task=view&id=4654&Itemid=88

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